On Semiconductor (ON) or Onsemi, has disclosed a major restructuring plan to lay off about 2,400 employees globally in 2025. This decision follows the chipmaker’s struggle with declining demand for its automotive chips, which is impacting its financial performance.
The job reductions will affect all business divisions worldwide, including Onsemi’s design center in Bangalore, India. The company plans to consolidate nine sites and relocate nearly 300 employees as part of the restructuring effort.
As a result of these changes, Onsemi is expected to incur costs between $50 million and $60 million, with the majority of these costs recorded in the current fiscal year. However, Onsemi projects annual cost savings of $105 million to $115 million due to these job cuts.
Layoffs Follow Weak Q1 Outlook
Onsemi’s decision to cut its workforce is primarily driven by its falling revenue and profits, particularly in the automotive and industrial sectors. In Q4, the company’s revenue fell by 14.6% year-over-year and its net income was down 32.3%.
Further, Onsemi issued a first-quarter revenue forecast below Wall Street estimates, citing customer order reductions due to economic uncertainty. In addition, the Q1 sales outlook of between $1.35 billion and $1.45 billion, reflects a year-over-year decline, largely due to less demand for automotive chips. Investors must note that the auto industry is seeing a drop in demand because of higher car prices and inflation worries.
Importantly, Onsemi stated that it will reinvest some of the savings from the workforce cuts into new business initiatives and growth opportunities. With this plan, the company aims to navigate the current market downturn, streamline operations, and improve its financial position.
Is ON Stock a Buy or Sell?
Turning to Wall Street, ON stock has a Moderate Buy consensus rating based on 15 Buys, eight Holds, and one Sell assigned in the last three months. At $60.87, the average Onsemi price target implies an 18.84% upside potential. Shares of the company have declined 27.7% over the past three months.
