ON Semiconductor is on the case when it comes to making semiconductors. The company manufactures low-cost, high-volume analog, logic, and discrete semiconductors, with some 40,500 devices in its catalog. These components perform vital power control and interface functions in nearly every sort of electronic gear, from networking routers and wireless phones to household appliances and automotive braking systems. ON Semi sells directly to OEMs including Cisco, GE, Honeywell, Samsung, and Siemens, and to distributors such as Avnet and Arrow Electronics. More than 70% of ON Semi's sales are made in the Asia/Pacific region.
ON Semi transformed its operations in 2011 through two acquisitions. In early 2011 the company bought SANYO Semiconductor from SANYO Electric in a deal valued at $520 million. The acquisition boosted ON Semi's presence in Japan, its manufacturing capacity, and its intellectual property portfolio. The purchase also added a number of new products and technologies -- ranging from custom application-specific integrated circuits (ASICs) and high-density packaging to power modules and motor controls -- that enhance ON Semi's position as a supplier of energy-efficient electronics. ON Semi plans to operate SANYO Semiconductor as an independent division that will use the SANYO logo for up to three years, though the company is already set to sell the products of both companies to its worldwide base of 400-plus customers.
Also in 2011 the company paid $31.4 million to buy Cypress Semiconductor's complementary metal oxide semiconductor (CMOS) image sensor business to expand its own CMOS product line. The acquired CMOS image sensors are used in a variety of applications including digital photography, bar code imaging, medical x-ray imaging, biometrics, and aerospace. ON Semi cited the addition of key engineering talent and improved image sensor products for the industrial, medical, computing, and military markets as reasons for the purchase.
Overall sales for 2011 were up 49% over 2010, primarily as a result of the addition of SANYO Semiconductor. Though the company remained profitable, its net income dropped to $11.6 million (from $290 million). The lower profits are due to a large decrease in gross margins -- from 41.3% to 29.3% -- a result of the inclusion of SANYO Semiconductor expenses for the year. (Gross margin is the difference between selling price and cost; the difference is expressed as a percentage of selling price.)
ON Semi has continued to streamline operations and transfer production to higher-volume facilities that use more efficient wafer manufacturing technologies. As part of this strategy, the company announced that it would close its wafer manufacturing facility in Aizu, Japan, in 2012. Along with the consolidation of SANYO's Japan-based production facilities from five to two, ON Semi's company-owned, front-end manufacturing sites will be reduced from nine to six. In addition, the company plans to close two facilities in Thailand. Floods in 2011 caused extensive damage to production facilities in the country. – less