Onsemi, a leading semiconductor manufacturer, said it will cut job to approximately 1,000 employees. This decision comes as the company aims to streamline operations and cut costs in response to weak demand in the electric vehicle (EV) market and excess inventory at its customers.
Canalys forecasts the global EV market will grow by 27.1 percent in 2024, hitting 17.5 million units as compared with 13.7 million units in 2023.
The reduction in job at Onsemi will also involve consolidating nine sites and reassigning an additional 300 employees, with some being asked to relocate to other sites. These measures were disclosed in a regulatory filing and are part of Onsemi’s broader strategy to adapt to current market challenges, Reuters news report said.
Onsemi reported revenue of $1,862.7 million in the first-quarter. Onsemi is expecting revenue of $1,680 – $1,780 million in the second-quarter with 44.1 – 46.1 percent gross margin.
Market Conditions and Strategic Adjustments
Onsemi has faced significant headwinds due to a sluggish recovery in chip demand, particularly in the electric vehicle sector. The company, which had approximately 30,000 full-time employees as of December 31, 2023, supplies critical components such as drive train chips and driver-assistance systems including cameras and sensors for electric cars. Its silicon carbide chips are particularly notable for extending the range of electric vehicles.
The layoffs and site consolidations are expected to result in employment-related charges ranging from $65 million to $80 million over 2024 and 2025, with the process anticipated to be completed by 2025.
Financial and Operational Impact
Onsemi’s latest workforce reduction follows a similar move in 2023 when the company laid off around 1,900 employees. That earlier effort was aimed at shifting production focus towards more profitable chips and reducing costs by outsourcing other chip manufacturing processes.
Despite the current layoffs, Onsemi plans to reinvest a portion of the savings into new business initiatives and growth opportunities. This reinvestment strategy is aimed at strengthening the company’s market position and fostering innovation in its core areas.
Industry and Analyst Perspective
The semiconductor industry has been grappling with fluctuating demand, particularly in sectors like electric vehicles, which have experienced a slowdown. Onsemi’s strategic adjustments highlight the broader trend of companies in the semiconductor space taking proactive steps to manage costs and optimize operations in response to market conditions.
Onsemi’s focus on internally manufacturing its more profitable chips while outsourcing others is seen as a strategic move to enhance its competitiveness. By reallocating resources and optimizing its workforce, the company aims to navigate the current challenges while positioning itself for future growth.
Conclusion
Onsemi’s decision to cut 1,000 jobs and consolidate operations underscores the company’s efforts to streamline its business and reduce costs amid a challenging market environment. With plans to reinvest savings into strategic initiatives, Onsemi is positioning itself to adapt to evolving market demands and capitalize on new opportunities in the semiconductor industry.
