UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~April 1, 2022~~March 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

(Commission File Number) 001-39317

ON SEMICONDUCTOR CORPORATION

(Exact name of registrant as specified in its charter)


Delaware						36-3840979
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

~~5005 E. McDowell~~5701 N. Pima Road

~~Phoenix,~~Scottsdale, AZ ~~85008~~85250

(602) 244-6600

(Address, zip code and telephone number, including area code, of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	ON	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

The number of shares outstanding of the issuer's class of common stock as of the close of business on April ~~27, 2022:~~26, 2023:


Title of Each Class						Number of Shares
Common Stock, par value $0.01 per share						~~434,505,663~~431,872,829

Table of Contents

ON SEMICONDUCTOR CORPORATION FORM 10-Q

TABLE OF CONTENTS


Part I: Financial Information
	Item 1. Financial Statements (unaudited)	4
	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	2427
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	3132
	Item 4. Controls and Procedures	3132
Part II: Other Information
	Item 1. Legal Proceedings	3234
	Item 1A. Risk Factors	3234
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3335
	Item 3. Defaults Upon Senior Securities	3335
	Item 4. Mine Safety Disclosures	3335
	Item 5. Other Information	3335
	Item 6. Exhibits	3436
	Signatures	3537

(See the glossary of selected terms immediately following this table of contents for definitions of certain abbreviated terms)

Table of Contents

ON SEMICONDUCTOR CORPORATION

FORM 10-Q

GLOSSARY OF SELECTED ABBREVIATED TERMS*


Abbreviated Term						Defined Term
0% Notes						0% Convertible Senior Notes due 2027
~~1.00%~~0.50% Notes						~~1.00%~~0.50% Convertible Senior Notes due ~~2020~~2029
1.625% Notes						1.625% Convertible Senior Notes due 2023

3.875% Notes						3.875% Senior Notes due 2028
ADAS						Advanced driver-assistance systems
~~AEC~~						~~Automotive Electronics Council~~
Amended Credit Agreement						Credit Agreement, dated as of April 15, 2016, as subsequently amended, by and among the Company, as borrower, the several lenders party thereto, Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and certain other parties, providing for the Revolving Credit Facility and the Term Loan “B” Facility
Amended and Restated SIP						ON Semiconductor Corporation Amended and Restated Stock Incentive Plan, as amended




ASU						Accounting Standards Update









Commission or SEC						Securities and Exchange Commission
EFK						East Fishkill, New York fabrication facility
ESPP						ON Semiconductor Corporation 2000 Employee Stock Purchase Plan, as amended
Exchange Act						Securities Exchange Act of 1934, as amended

FASB						Financial Accounting Standards Board
GTAT						GT Advanced Technologies Inc.



IP						Intellectual property



















IRS						United States Internal Revenue Service
IT						Information Technology
OEM						Original Equipment Manufacturer
QCS						Division within ASG, primarily associated with the legacy Quantenna division
Revolving Credit Facility						A $1.97 billion revolving credit facility created pursuant to the Amended Credit Agreement
ROU						Right-of-use
RSU						Restricted stock unit
SiC						Silicon carbide




Securities Act						Securities Act of 1933, as amended



Term Loan "B" Facility						A $2.4 billion term loan "B" facility created pursuant to the Amended Credit Agreement
U.S. or United States						United States of America

* Terms used, but not defined, within the body of the Form 10-Q are defined in this Glossary.

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

ON SEMICONDUCTOR CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

(unaudited)


		April 1, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	1,645.1	$	1,352.6	Cash and cash equivalents	$	2,702.4	$	2,919.0

Receivables, net	Receivables, net	910.7		809.4		Receivables, net	880.9		842.3
Inventories	Inventories	1,496.0		1,379.5		Inventories	1,814.9		1,616.8
Other current assets	Other current assets	315.6		240.1		Other current assets	318.1		351.3

Total current assets	Total current assets	4,367.4		3,781.6		Total current assets	5,716.3		5,729.4

Property, plant and equipment, net	Property, plant and equipment, net	2,559.4		2,524.3		Property, plant and equipment, net	3,692.9		3,450.7
Goodwill	Goodwill	1,936.7		1,937.5		Goodwill	1,577.6		1,577.6
Intangible assets, net	Intangible assets, net	474.5		495.7		Intangible assets, net	339.8		359.7
Deferred tax assets	Deferred tax assets	349.3		366.3		Deferred tax assets	473.1		376.7
Right-of-use financing lease						Right-of-use financing lease	45.2		45.8
Other assets	Other assets	525.1		520.6		Other assets	429.4		438.6
Total assets	Total assets	$	10,212.4	$	9,626.0	Total assets	$	12,274.3	$	11,978.5
Liabilities, Non-Controlling Interest and Stockholders’ Equity
Liabilities and Stockholders’ Equity						Liabilities and Stockholders’ Equity
Accounts payable	Accounts payable	$	725.3	$	635.1	Accounts payable	$	976.2	$	852.1
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	670.4		747.6		Accrued expenses and other current liabilities	666.0		1,047.3
Current portion of financing lease liabilities						Current portion of financing lease liabilities	11.6		14.2
Current portion of long-term debt	Current portion of long-term debt	170.4		160.7		Current portion of long-term debt	926.2		147.8
Total current liabilities	Total current liabilities	1,566.1		1,543.4		Total current liabilities	2,580.0		2,061.4
Long-term debt	Long-term debt	3,035.4		2,913.9		Long-term debt	2,538.0		3,045.7
Deferred tax liabilities	Deferred tax liabilities	40.9		43.2		Deferred tax liabilities	36.6		34.1
Long-term financing lease liabilities						Long-term financing lease liabilities	24.0		23.0
Other long-term liabilities	Other long-term liabilities	552.0		521.1		Other long-term liabilities	628.7		607.3
Total liabilities	Total liabilities	5,194.4		5,021.6		Total liabilities	5,807.3		5,771.5
Commitments and contingencies (Note 10)		0		0
Commitments and contingencies (Note 9)						Commitments and contingencies (Note 9)
ON Semiconductor Corporation stockholders’ equity:	ON Semiconductor Corporation stockholders’ equity:					ON Semiconductor Corporation stockholders’ equity:
Common stock ($0.01 par value, 1,250,000,000 shares authorized, 606,021,655 and 603,044,079 issued, 434,494,753 and 432,472,818 outstanding, respectively)		6.1		6.0
Common stock ($0.01 par value, 1,250,000,000 shares authorized, 610,278,043 and 608,367,713 issued, 431,851,090 and 431,936,415 outstanding, respectively)						Common stock ($0.01 par value, 1,250,000,000 shares authorized, 610,278,043 and 608,367,713 issued, 431,851,090 and 431,936,415 outstanding, respectively)	6.1		6.1
Additional paid-in capital	Additional paid-in capital	4,533.3		4,633.3		Additional paid-in capital	4,633.6		4,670.9
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(26.4)		(40.6)		Accumulated other comprehensive loss	(29.6)		(23.2)
Accumulated earnings	Accumulated earnings	2,992.4		2,435.1		Accumulated earnings	4,826.1		4,364.4
Less: Treasury stock, at cost: 171,526,902 and 170,571,261 shares, respectively		(2,507.2)		(2,448.4)
Less: Treasury stock, at cost: 178,426,953 and 176,431,298 shares, respectively						Less: Treasury stock, at cost: 178,426,953 and 176,431,298 shares, respectively	(2,988.2)		(2,829.7)
Total ON Semiconductor Corporation stockholders’ equity	Total ON Semiconductor Corporation stockholders’ equity	4,998.2		4,585.4		Total ON Semiconductor Corporation stockholders’ equity	6,448.0		6,188.5
Non-controlling interest	Non-controlling interest	19.8		19.0		Non-controlling interest	19.0		18.5
Total stockholders' equity		5,018.0		4,604.4
Total liabilities and stockholders' equity		$	10,212.4	$	9,626.0
Total stockholders’ equity						Total stockholders’ equity	6,467.0		6,207.0
Total liabilities and stockholders’ equity						Total liabilities and stockholders’ equity	$	12,274.3	$	11,978.5

See accompanying notes to consolidated financial statements

Table of Contents

ON SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(in millions, except per share data)

(unaudited)


		Quarters Ended				Quarters Ended
		April 1, 2022		April 2, 2021				March 31, 2023		April 1, 2022
Revenue	Revenue	$	1,945.0	$	1,481.7		Revenue	$	1,959.7	$	1,945.0
Cost of revenue (exclusive of amortization shown below)		983.7		960.5
Cost of revenue							Cost of revenue	1,042.2		983.7
Gross profit	Gross profit	961.3		521.2			Gross profit	917.5		961.3
Operating expenses:	Operating expenses:						Operating expenses:
Research and development	Research and development	156.8		173.6			Research and development	138.4		156.8
Selling and marketing	Selling and marketing	71.1		78.9			Selling and marketing	71.8		71.1
General and administrative	General and administrative	77.9		72.4			General and administrative	75.9		77.9

Amortization of acquisition-related intangible assets	Amortization of acquisition-related intangible assets	21.3		25.0			Amortization of acquisition-related intangible assets	15.0		21.3
Restructuring, asset impairments and other charges, net	Restructuring, asset impairments and other charges, net	(13.0)		42.5			Restructuring, asset impairments and other charges, net	51.5		(13.0)
Intangible asset impairment		—		2.9

Total operating expenses	Total operating expenses	314.1		395.3			Total operating expenses	352.6		314.1
Operating income	Operating income	647.2		125.9			Operating income	564.9		647.2
Other income (expense), net:	Other income (expense), net:						Other income (expense), net:
Interest expense	Interest expense	(21.6)		(33.4)			Interest expense	(26.4)		(21.6)
Interest income	Interest income	0.4		0.4			Interest income	17.1		0.4
Loss on debt prepayment							Loss on debt prepayment	(13.3)		—

Loss on divestiture of business							Loss on divestiture of business	(1.1)		—

Other income (expense)		2.1		4.5
Other income							Other income	4.7		2.1
Other income (expense), net	Other income (expense), net	(19.1)		(28.5)			Other income (expense), net	(19.0)		(19.1)
Income before income taxes	Income before income taxes	628.1		97.4			Income before income taxes	545.9		628.1
Income tax provision	Income tax provision	(97.1)		(7.1)			Income tax provision	(83.7)		(97.1)
Net income	Net income	531.0		90.3			Net income	462.2		531.0
Less: Net income attributable to non-controlling interest	Less: Net income attributable to non-controlling interest	(0.8)		(0.4)			Less: Net income attributable to non-controlling interest	(0.5)		(0.8)
Net income attributable to ON Semiconductor Corporation	Net income attributable to ON Semiconductor Corporation	$	530.2	$	89.9		Net income attributable to ON Semiconductor Corporation	$	461.7	$	530.2

Net income for diluted earnings per share of common stock (Note 8)		530.7		89.9
Net income per share of common stock:
Net income for diluted earnings per share of common stock (Note 7)							Net income for diluted earnings per share of common stock (Note 7)	462.1		530.7
Net income per share of common stock attributable to ON Semiconductor Corporation:							Net income per share of common stock attributable to ON Semiconductor Corporation:
Basic	Basic	$	1.22	$	0.22		Basic	$	1.07	$	1.22
Diluted	Diluted	$	1.18	$	0.20		Diluted	$	1.03	$	1.18
Weighted-average shares of common stock outstanding:	Weighted-average shares of common stock outstanding:						Weighted-average shares of common stock outstanding:
Basic	Basic	433.3		413.4			Basic	431.9		433.3
Diluted	Diluted	448.9		445.4			Diluted	448.5		448.9

Comprehensive income, net of tax:
Comprehensive income (loss), net of tax:							Comprehensive income (loss), net of tax:
Net income	Net income	$	531.0	$	90.3		Net income	$	462.2	$	531.0
Foreign currency translation adjustments	Foreign currency translation adjustments	(2.4)		(2.3)			Foreign currency translation adjustments	0.3		(2.4)
Effects of cash flow hedges and other adjustments	Effects of cash flow hedges and other adjustments	16.6		4.0			Effects of cash flow hedges and other adjustments	(6.7)		16.6

Other comprehensive income, net of tax		14.2		1.7
Other comprehensive income (loss), net of tax							Other comprehensive income (loss), net of tax	(6.4)		14.2
Comprehensive income	Comprehensive income	545.2		92.0			Comprehensive income	455.8		545.2
Comprehensive income attributable to non-controlling interest	Comprehensive income attributable to non-controlling interest	(0.8)		(0.4)			Comprehensive income attributable to non-controlling interest	(0.5)		(0.8)
Comprehensive income attributable to ON Semiconductor Corporation	Comprehensive income attributable to ON Semiconductor Corporation	$	544.4	$	91.6		Comprehensive income attributable to ON Semiconductor Corporation	$	455.3	$	544.4

See accompanying notes to consolidated financial statements

Table of Contents

ON SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in millions, except share data)

(unaudited)
Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Treasury Stock Non-Controlling Interest
Number of shares At Par Value Accumulated Earnings Number of shares At Cost Total Equity
Balance at December 31, 2021 603,044,079 $ 6.0 $ 4,633.3 $ (40.6) $ 2,435.1 (170,571,261) $ (2,448.4) $ 19.0 $ 4,604.4
Impact of the adoption of ASU 2020-06 — — (129.1) — 27.1 — — — (102.0)
Shares issued pursuant to the ESPP 126,388 — 6.7 — — — — — 6.7
RSUs and stock grant awards issued 2,851,188 0.1 (0.1) — — — — — —
Payment of tax withholding for RSUs — — — — — (955,641) (58.8) — (58.8)
Share-based compensation — — 22.5 — — — — — 22.5
Comprehensive income — — — 14.2 530.2 — — 0.8 545.2
Balance at April 1, 2022 606,021,655 $ 6.1 $ 4,533.3 $ (26.4) $ 2,992.4 (171,526,902) $ (2,507.2) $ 19.8 $ 5,018.0


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss				Treasury Stock			Non-Controlling Interest
	Number of shares	At Par Value						Accumulated Earnings		Number of shares	At Cost				Total Equity

Balance at December 31, 2022	608,367,713	$	6.1	$	4,670.9	$	(23.2)	$	4,364.4	(176,431,298)	$	(2,829.7)	$	18.5	$	6,207.0



Shares issued pursuant to the ESPP	136,856	—		7.3		—		—		—	—		—		7.3
RSUs released and stock grant awards issued	1,680,376	—		—		—		—		—	—		—		—

Partial settlement - 1.625% Notes	93,098	—		—		—		—		—	—		—		—

Partial settlement of bond hedges - 1.625% Notes	—	—		6.9		—		—		(93,098)	(6.9)		—		—

Warrants and bond hedges, net - 0.50% Notes	—	—		(171.5)		—		—		—	—		—		(171.5)
Tax impact of warrants and bond hedges, net	—	—		92.3		—		—		—	—		—		92.3
Payment of tax withholding for RSUs	—	—		—		—		—		(578,406)	(47.6)		—		(47.6)
Share-based compensation	—	—		27.7		—		—		—	—		—		27.7
Repurchase of common stock	—	—		—		—		—		(1,324,151)	(104.0)		—		(104.0)


Comprehensive income (loss)	—	—		—		(6.4)		461.7		—	—		0.5		455.8
Balance at March 31, 2023	610,278,043	$	6.1	$	4,633.6	$	(29.6)	$	4,826.1	(178,426,953)	$	(2,988.2)	$	19.0	$	6,467.0


Balance at December 31, 2020		570,766,439	$	5.7	$	4,133.1	$	(57.6)	$	1,425.5	(158,923,810)	$	(1,968.2)	$	19.6	$	3,558.1
Balance at December 31, 2021																		Balance at December 31, 2021	603,044,079	$	6.0	$	4,633.3	$	(40.6)	$	2,435.1	(170,571,261)	$	(2,448.4)	$	19.0	$	4,604.4
Impact of the adoption of ASU 2020-06																		Impact of the adoption of ASU 2020-06	—	—		(129.1)		—		27.1		—	—		—		(102.0)

Shares issued pursuant to the ESPP																		Shares issued pursuant to the ESPP	126,388	—		6.7		—		—		—	—		—		6.7
RSUs released and stock grant awards issued																		RSUs released and stock grant awards issued	2,851,188	0.1		(0.1)		—		—		—	—		—		—

Shares issued pursuant to the ESPP		204,415	—		5.7		—		—		—	—		—		5.7
RSUs and stock grant awards issued		2,269,328	—		—		—		—		—	—		—		—
Shares issued upon exercise of warrants for 1.00% Notes		6,313,262	0.1		(0.1)		—		—		—	—		—		—

Payment of tax withholding for RSUs	Payment of tax withholding for RSUs	—	—		—		—		—		(733,223)	(28.5)		—		(28.5)		Payment of tax withholding for RSUs	—	—		—		—		—		(955,641)	(58.8)		—		(58.8)
Share-based compensation	Share-based compensation	—	—		22.3		—		—		—	—		—		22.3		Share-based compensation	—	—		22.5		—		—		—	—		—		22.5

Comprehensive income	Comprehensive income	—	—		—		1.7		89.9		—	—		0.4		92.0		Comprehensive income	—	—		—		14.2		530.2		—	—		0.8		545.2
Balance at April 2, 2021		579,553,444	$	5.8	$	4,161.0	$	(55.9)	$	1,515.4	(159,657,033)	$	(1,996.7)	$	20.0	$	3,649.6
Balance at April 1, 2022																		Balance at April 1, 2022	606,021,655	$	6.1	$	4,533.3	$	(26.4)	$	2,992.4	(171,526,902)	$	(2,507.2)	$	19.8	$	5,018.0

See accompanying notes to consolidated financial statements

Table of Contents

ON SEMICONDUCTOR CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)


		Quarters Ended					Quarters Ended
		April 1, 2022		April 2, 2021			March 31, 2023		April 1, 2022
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income	Net income	$	531.0	$	90.3	Net income	$	462.2	$	531.0
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	140.6		153.4		Depreciation and amortization	145.0		140.6
(Gain) loss on sale or disposal of fixed assets		(16.6)		0.3

Loss (gain) on sale or disposal of fixed assets						Loss (gain) on sale or disposal of fixed assets	1.2		(16.6)
Loss on divestiture of business						Loss on divestiture of business	1.1		—
Loss on debt prepayment						Loss on debt prepayment	13.3		—

Amortization of debt discount and issuance costs	Amortization of debt discount and issuance costs	3.2		2.4		Amortization of debt discount and issuance costs	2.9		3.2

Share-based compensation	Share-based compensation	22.5		22.3		Share-based compensation	27.7		22.5
Non-cash interest on convertible notes		—		4.6

Non-cash asset impairment charges	Non-cash asset impairment charges	6.7		6.1		Non-cash asset impairment charges	12.7		6.7

Change in deferred tax balances	Change in deferred tax balances	38.3		(23.2)		Change in deferred tax balances	(1.5)		38.3

Other	Other	0.5		(2.0)		Other	(7.0)		0.5
Changes in assets and liabilities (exclusive of divestiture):
Changes in assets and liabilities (exclusive of divestitures):						Changes in assets and liabilities (exclusive of divestitures):
Receivables	Receivables	(107.2)		(9.9)		Receivables	(37.7)		(107.2)
Inventories	Inventories	(116.7)		(42.0)		Inventories	(198.1)		(116.7)
Other assets	Other assets	(0.8)		9.9		Other assets	54.8		(0.8)
Accounts payable	Accounts payable	35.7		8.9		Accounts payable	53.5		35.7
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	(83.2)		12.8		Accrued expenses and other current liabilities	(154.6)		(83.2)
Other long-term liabilities	Other long-term liabilities	24.6		(15.4)		Other long-term liabilities	33.4		24.6
Net cash provided by operating activities	Net cash provided by operating activities	$	478.6	$	218.5	Net cash provided by operating activities	$	408.9	$	478.6
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchase of property, plant and equipment	Purchase of property, plant and equipment	$	(173.8)	$	(77.0)	Purchase of property, plant and equipment	$	(321.5)	$	(173.8)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	36.7		0.2		Proceeds from sale of property, plant and equipment	1.7		36.7
Deposits utilized (made) for purchase of property, plant and equipment	Deposits utilized (made) for purchase of property, plant and equipment	1.6		(0.4)		Deposits utilized (made) for purchase of property, plant and equipment	(16.7)		1.6
Divestiture of business, net of cash transferred and deposits received	Divestiture of business, net of cash transferred and deposits received	12.9		—		Divestiture of business, net of cash transferred and deposits received	—		12.9
Payments related to prior acquisition		(2.4)		—

Purchase of available-for-sale securities	Purchase of available-for-sale securities	(7.8)		—		Purchase of available-for-sale securities	—		(7.8)
Proceeds from sale or maturity of available-for-sale securities	Proceeds from sale or maturity of available-for-sale securities	3.4		—		Proceeds from sale or maturity of available-for-sale securities	10.8		3.4

Payments related to acquisition of business, net of cash acquired						Payments related to acquisition of business, net of cash acquired	(236.3)		(2.4)

Net cash used in investing activities	Net cash used in investing activities	$	(129.4)	$	(77.2)	Net cash used in investing activities	$	(562.0)	$	(129.4)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds for the issuance of common stock under the ESPP	Proceeds for the issuance of common stock under the ESPP	$	7.8	$	6.6	Proceeds for the issuance of common stock under the ESPP	$	7.3	$	7.8

Payment of tax withholding for RSUs	Payment of tax withholding for RSUs	(58.8)		(28.5)		Payment of tax withholding for RSUs	(47.6)		(58.8)
Repurchase of common stock						Repurchase of common stock	(104.0)		—
Issuance and borrowings under debt agreements						Issuance and borrowings under debt agreements	1,470.0		—
Reimbursement of debt issuance and other financing costs						Reimbursement of debt issuance and other financing costs	4.5		—
Payment of debt issuance and other financing costs						Payment of debt issuance and other financing costs	(4.8)		—
Repayment of borrowings under debt agreements						Repayment of borrowings under debt agreements	(1,213.7)		(4.1)
Payment for purchase of bond hedges						Payment for purchase of bond hedges	(414.0)		—
Proceeds from issuance of warrants						Proceeds from issuance of warrants	242.5		—

Repayment of borrowings under debt agreements		(4.1)		(154.1)

Payments related to prior acquisition		—		(2.1)

Payment of financing lease obligations						Payment of financing lease obligations	(3.6)		—

Dividend to non-controlling shareholder	Dividend to non-controlling shareholder	(2.2)		—		Dividend to non-controlling shareholder	—		(2.2)
Net cash used in financing activities	Net cash used in financing activities	$	(57.3)	$	(178.1)	Net cash used in financing activities	$	(63.4)	$	(57.3)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	Effect of exchange rate changes on cash, cash equivalents and restricted cash	(0.7)		(0.8)		Effect of exchange rate changes on cash, cash equivalents and restricted cash	0.1		(0.7)
Net increase (decrease) in cash, cash equivalents and restricted cash		291.2		(37.6)
Cash, cash equivalents and restricted cash, beginning of period (Note 6)		1,377.7		1,081.5
Cash, cash equivalents and restricted cash, end of period (Note 6)		$	1,668.9	$	1,043.9
Net (decrease) increase in cash, cash equivalents and restricted cash						Net (decrease) increase in cash, cash equivalents and restricted cash	(216.4)		291.2
Cash, cash equivalents and restricted cash, beginning of period (Note 5)						Cash, cash equivalents and restricted cash, beginning of period (Note 5)	2,933.0		1,377.7
Cash, cash equivalents and restricted cash, end of period (Note 5)						Cash, cash equivalents and restricted cash, end of period (Note 5)	$	2,716.6	$	1,668.9

See accompanying notes to consolidated financial statements

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1: Background and Basis of Presentation

ON Semiconductor Corporation ~~together~~(“onsemi,” “we,” “us,” “our,” or the “Company”), with its wholly and majority-owned subsidiaries, ~~which operate~~operates under the onsemiTM brand ("onsemi," "we," "us," "our" or the "Company"), uses a thirteen-week fiscal quarter accounting period for the first three fiscal quarters of each year, with the first quarter of 2022 having ended on April 1, 2022 and each fiscal year ending on December 31. brand.

The ~~quarters ended April 1, 2022 and April 2, 2021 contained 91 and 92 days, respectively. As of April 1, 2022, the~~ Company ~~was~~is organized into ~~the following 3~~three operating and reportable segments: the Power Solutions Group ("PSG"), the Advanced Solutions Group ("ASG"), and the Intelligent Sensing Group ("ISG").

The Company's fiscal calendar year begins on January 1 and ends on December 31. The fiscal quarters contain a thirteen-week accounting period. Minor day adjustments are required in the first and fourth quarters to account for the Company's fiscal calendar year's starting and ending dates. The quarters ended March 31, 2023 and April 1, 2022 contained 90 days and 91 days, respectively.

The accompanying unaudited financial statements as of and for the quarter ended ~~April 1, 2022~~March 31, 2023 have been prepared ~~in accordance with~~following generally accepted accounting principles in the United States of America ("GAAP"). for interim financial reporting and the rules and regulations of the SEC for interim reporting. Accordingly, the unaudited financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. The balance sheet as of December 31, ~~2021~~2022 was derived from the Company's audited financial statements but does not include all disclosures required by GAAP for ~~audited~~annual financial statements. In the opinion of the Company's management, the interim information ~~includes~~contains all adjustments, which include normal recurring adjustments necessary for a fair statement of the results for the interim periods. The footnote disclosures related to the interim financial information ~~included~~contained herein are also unaudited. Such financial information should be read in conjunction with the consolidated financial statements and related notes thereto for the year ended December 31, ~~2021~~2022, included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, which was filed with the SEC on February ~~14, 2022~~6, 2023 (the ~~"2021~~"2022 Form 10-K").

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. Management evaluates these estimates and judgments on an ongoing basis and bases its estimates on experience, current and expected future conditions, third-party evaluations, and various other assumptions that management believes are reasonable under the circumstances. Significant estimates have been used by management in conjunction with the following: (i) future payouts for customer incentives and amounts subject to allowances and returns; (ii) valuation and obsolescence relating to inventories; ~~and~~ (iii) measurement of valuation allowances against deferred tax assets and evaluations of uncertain tax ~~positions.~~positions and (iv) testing for impairment of long-lived assets and goodwill. Additionally, during periods where it becomes applicable, significant estimates will be used by management in determining the future cash flows ~~used to assess and test for impairment of long-lived assets and goodwill and in assumptions~~ used in connection with business combinations. Actual results may differ from the estimates and assumptions used in the consolidated financial statements.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Note 2: Revenue and Segment Information

The Company is organized into 3three operating and reportable segments consisting of PSG, ASG and ISG. These segments represent the ~~Company’s~~Company's view of the business, and its gross profit is used to evaluate the performance of the ~~Company’s~~Company's segments, the progress of major initiatives and the allocation of resources. ~~Gross profit is exclusive of the amortization of acquisition-related intangible assets.~~

During the quarter ended April 1, 2022, the Company received capacity payments and deposits of $5.5 million, which was recorded as a contract liability, of which an immaterial amount was recognized as revenue for satisfying the associated performance obligations. The remaining balances amounting to $27.6 million and $28.9 million were recorded as current liabilities and other long-term liabilities, respectively. Contract assets were immaterial as of April 1, 2022. There were no corresponding amounts for the quarter ended April 2, 2021.

A significant portion of the Company’s orders are firm commitments that are non-cancellable, including certain orders or contracts with a duration of less than one year. Certain of the Company's customer contracts are multi-year agreements that include ~~firmly~~ committed amounts ~~for which the~~("Long-term Supply Agreements" or "LTSA's").

The estimated remaining performance obligations as of ~~April 1, 2022 were~~March 31, 2023, are approximately ~~$8.6~~$17.6 billion (excluding the remaining performance obligations for contracts having aan original duration of one year or less). This amount is subject to contractual increases based on negotiated contract prices and volumes, defined product mix flexibility, and the timing of new part introductions, among other contractual provisions. The Company expects to recognize approximately ~~30%~~33% of ~~this amount~~the remaining purchase obligation as revenue during the next twelve months upon shipment of products under these contracts. Total ~~sales~~revenue estimates ~~are based on negotiated contract prices and demand quantities, and~~ could be influenced by risks and uncertainties including manufacturing ~~and~~or supply chain constraints, modifications to customer agreements, and regulatory changes, among other ~~things.~~factors. Accordingly, ~~the amount represented by remaining performance obligations may not be indicative of the~~our actual revenue recognized for the remaining performance obligation in future periods may fluctuate from estimates.

Certain of the Company’s LTSA’s include non-cancellable capacity payments from the customer, which are generally due within 30 days of the agreement. These payments reserve production availability or are prepayments to secure production availability and are not recognized as revenue until the performance obligations are satisfied. For the periods ending March 31, 2023, and April 1, 2022, the Company recognized revenue of $14.8 million and $4.5 million, respectively, for the portion of performance obligations fulfilled during those periods.

As of March 31, 2023, and December 31, 2022, the remaining capacity payments were $225.5 million and $190.4 million, respectively, of which $69.0 million and $60.5 million were recorded as current liabilities, with the remainder recorded as other long-term liabilities.

Revenue and gross profit for the Company’s operating and reportable segments are as follows (in millions):


		PSG		ASG		ISG		Total			PSG		ASG		ISG		Total
For the quarter ended April 1, 2022:
For the quarter ended March 31, 2023:										For the quarter ended March 31, 2023:
Revenue from external customers	Revenue from external customers	$	986.7	$	689.3	$	269.0	$	1,945.0	Revenue from external customers	$	1,012.8	$	592.8	$	354.1	$	1,959.7
Gross profit	Gross profit	$	474.7	$	366.7	$	119.9	$	961.3	Gross profit	$	480.3	$	260.1	$	177.1	$	917.5
For the quarter ended April 2, 2021:
For the quarter ended April 1, 2022:										For the quarter ended April 1, 2022:
Revenue from external customers	Revenue from external customers	$	747.0	$	531.5	$	203.2	$	1,481.7	Revenue from external customers	$	986.7	$	689.3	$	269.0	$	1,945.0
Gross profit	Gross profit	$	246.5	$	206.8	$	67.9	$	521.2	Gross profit	$	474.7	$	366.7	$	119.9	$	961.3

The Company had one customer, a distributor, whose revenue accounted for approximately ~~12.4%~~10.1% and ~~10.6%~~12.4% of the Company's total revenue for the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ respectively.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Revenue for the Company's operating and reportable segments disaggregated into geographic locations based on sales billed from the respective country and sales channels are as follows (in millions):

Quarter Ended April 1, 2022
PSG ASG ISG Total
Geographic Location
Singapore $ 280.5 $ 233.8 $ 41.4 $ 555.7
Hong Kong 303.1 173.9 52.6 529.6
United Kingdom 186.9 106.6 52.0 345.5
United States 144.9 92.3 74.5 311.7
Other 71.3 82.7 48.5 202.5
Total $ 986.7 $ 689.3 $ 269.0 $ 1,945.0
Sales Channel
Distributors $ 633.9 $ 356.9 $ 150.6 $ 1,141.4
Direct Customers 352.8 332.4 118.4 803.6
Total $ 986.7 $ 689.3 $ 269.0 $ 1,945.0

~~Table of Contents~~

~~ON SEMICONDUCTOR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(unaudited)~~


	Quarter Ended March 31, 2023
	PSG		ASG		ISG		Total
Geographic Location
Hong Kong	$	286.9	$	139.7	$	63.8	490.4
Singapore	276.4		116.1		58.2		450.7
United Kingdom	204.1		128.1		81.1		413.3
United States	166.3		121.3		101.5		389.1
Other	79.1		87.6		49.5		216.2
Total	$	1,012.8	$	592.8	$	354.1	$	1,959.7

Sales Channel
Distributors	$	629.3	$	222.8	$	187.1	$	1,039.2
Direct Customers	383.5		370.0		167.0		920.5

Total	$	1,012.8	$	592.8	$	354.1	$	1,959.7


		Quarter Ended April 2, 2021									Quarter Ended April 1, 2022
		PSG		ASG		ISG		Total			PSG		ASG		ISG		Total
Geographic Location	Geographic Location									Geographic Location
Singapore	Singapore	$	274.5	$	201.7	$	32.8	$	509.0	Singapore	$	280.5	$	233.8	$	41.4	$	555.7
Hong Kong	Hong Kong	196.1		100.5		45.6		342.2		Hong Kong	303.1		173.9		52.6		529.6
United Kingdom	United Kingdom	142.7		82.6		43.6		268.9		United Kingdom	186.9		106.6		52.0		345.5
United States	United States	75.3		70.2		38.8		184.3		United States	144.9		92.3		74.5		311.7
Other	Other	58.4		76.5		42.4		177.3		Other	71.3		82.7		48.5		202.5
Total	Total	$	747.0	$	531.5	$	203.2	$	1,481.7	Total	$	986.7	$	689.3	$	269.0	$	1,945.0

Sales Channel	Sales Channel									Sales Channel
Distributors	Distributors	$	523.9	$	288.9	$	121.2	$	934.0	Distributors	$	633.9	$	356.9	$	150.6	$	1,141.4
Direct Customers	Direct Customers	223.1		242.6		82.0		547.7		Direct Customers	352.8		332.4		118.4		803.6

Total	Total	$	747.0	$	531.5	$	203.2	$	1,481.7	Total	$	986.7	$	689.3	$	269.0	$	1,945.0

The Company operates in various geographic locations. Sales to external customers have little correlation with the location of ~~manufacturers.~~the Company's manufacturing or the location of the end-customers. It is, therefore, not meaningful to present operating profit by geographical location. The Company does not discretely allocate assets to its operating segments, nor does management evaluate operating segments using discrete asset information. The Company’s consolidated assets are not specifically ascribed to its individual reportable segments. ~~Rather,~~Instead, assets used in operations are generally shared across the Company’s operating and reportable segments.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Property, plant and equipment, net by geographic location, is summarized as follows (in millions):


		As of					As of
		April 1, 2022		December 31, 2021			March 31, 2023		December 31, 2022
United States	United States	$	752.4	$	767.1	United States	$	1,360.8	$	1,329.2
South Korea	South Korea	573.0		492.8		South Korea	990.9		871.0
Czech Republic						Czech Republic	335.3		279.3
Philippines	Philippines	330.7		342.4		Philippines	287.1		296.8
Czech Republic		220.7		214.2
China	China	214.0		216.8		China	227.4		215.3
Malaysia						Malaysia	199.0		190.2
Japan	Japan	188.1		198.6		Japan	128.1		133.2
Malaysia		172.8		175.3
Other	Other	107.7		117.1		Other	164.3		135.7
Total	Total	$	2,559.4	$	2,524.3	Total	$	3,692.9	$	3,450.7

~~Note 3: Recent Accounting Pronouncements~~

~~Adopted:~~

~~ASU 2020-06 - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (~~"~~ASU 2020-06~~")

In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. Also, ASU 2020-06 requires the application of the if-converted method for the purpose of calculating diluted earnings per share, and the treasury stock method will be no longer available for instruments that fall under this category. The Company adopted ASU 2020-06 as of January 1, 2022 using the modified retrospective method, and recorded adjustments to reduce additional paid-in capital by $129.1 million and increase opening retained earnings by $27.1 million to reflect the cumulative effect of the adoption. See Note 7: ''Long-Term Debt'' for further information.

~~Pending adoption:~~

~~ASU 2021-10 - Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance ("ASU 2021-10")~~

In November 2021, the FASB issued ASU 2021-10, which requires business entities to make annual disclosures about the nature of the certain government assistance received and the related accounting policy used to account for such assistance along with certain other disclosures related to the transactions. If an entity omits any required disclosures because it is legally prohibited, it must disclose that fact. ASU 2021-10 will be applicable to the 2022 annual financial statements, and the Company is currently evaluating the applicable disclosures.

~~Table of Contents~~

~~ON SEMICONDUCTOR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(unaudited)~~

Note 4:3: Acquisition and Divestitures

Acquisition:

During the year ended December 31, 2022, the Company closed the acquisition of EFK. The ~~Company finalized its determination relating~~preliminary allocation of the purchase price of EFK to the ~~fair value of~~ assets acquired and liabilities assumed ~~from GTAT. The final allocation of purchase price, which did not change from the preliminary allocation disclosed in the 2021 Form 10-K~~based on their relative fair values is as follows (in millions):


	Purchase Price Allocation
~~Cash and cash equivalents~~Inventory	$	~~8.2~~3.3
~~Inventory and other~~Other current assets	~~10.0~~4.4
Property, plant and equipment	~~31.9~~
~~Goodwill~~	~~274.8~~
~~Intangible assets - Developed Technology~~	~~130.0~~
~~Deferred tax assets~~	~~13.4~~396.5
Other non-current assets	~~7.4~~11.4



Total assets acquired	~~475.7~~415.6
Current liabilities	~~5.8~~3.0
Other long-term liabilities	~~35.0~~6.3
Total liabilities assumed	~~40.8~~9.3
Net assets acquired/purchase price	$	~~434.9~~406.3

~~All~~The preliminary allocation, assumptions and disclosures ~~remained unchanged from~~are materially consistent with the amounts included in the ~~2021~~2022 Form 10-K.

~~Divestitures:~~The Company paid the remaining acquisition consideration of $236.3 million on January 3, 2023, which is disclosed under investing activities in the Consolidated statement of cash flows.

~~Belgium fab~~

In February 2022, the Company divested its Oudenaarde, Belgium site to BelGaN Group BV, which primarily included the assets, liabilities and relevant employee group related to the six-inch front-end wafer manufacturing facility for an aggregate consideration of $19.9 million and recognized a nominal gain after offsetting the carrying values of the assets disposed and liabilities transferred.

~~South Portland, Maine fab~~

During the first quarter of 2022, the Company entered into an asset purchase agreement to divest its South Portland, Maine site to Diodes Incorporated, which includes the net assets and relevant employee group related to the eight-inch front-end wafer manufacturing facility. The transaction is expected to close during the second quarter of 2022 and result in a nominal gain or loss, and the corresponding assets have been classified as held for sale within other current assets.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Note 5:4: Restructuring, Asset Impairments and Other, Net

Details of restructuring, asset impairments and other charges, net are as follows (in millions):


		Restructuring		Asset Impairments		Other		Total			Restructuring		Asset Impairments			Other		Total
Quarter ended April 1, 2022

Quarter ended March 31, 2023										Quarter ended March 31, 2023
2023 Business Realignment										2023 Business Realignment	$	36.1	$	2.5	(1)	$	2.8	$	41.4
QCS wind down										QCS wind down	—		—			(2.3)		(2.3)
Other	Other	$	(0.5)	$	4.0	$	(16.5)	$	(13.0)	Other	—		10.2		(2)	2.2		12.4
Total	Total	$	(0.5)	$	4.0	$	(16.5)	$	(13.0)	Total	$	36.1	$	12.7		$	2.7	$	51.5

(1)Includes $1.7 million property, plant and equipment asset impairments charges and $0.8 million of ROU asset impairment charges associated with the 2023 Business Realignment efforts.

(2)Includes $10.2 million of property, plant and equipment and ROU lease asset impairment charges associated with site consolidation efforts in the United States.

A summary of changes in accrued restructuring balance is as follows (in millions):


	As of						As of
	December 31, 2022		Charges		Usage		March 31, 2023
Employee separation charges	$	4.4	$	36.1	$	(4.9)	$	35.6

Total	$	4.4	$	36.1	$	(4.9)	$	35.6

2023 Business Realignment

During the first quarter of 2023, the Company announced the elimination of approximately 400 jobs in an effort to realign its operating models, drive organizational effectiveness and efficiencies, and increase collaboration primarily within its ASG business unit and IT support organizations. As a result, ASG ceased its design and test operations in certain Asia and U.S.-based locations and initiated a plan to exit its Toulouse, France design center location. The announcement also included changes in the Company's IT operating model by transferring selected IT functions to strategic service providers.

In connection with these actions, the Company recognized severance costs, related benefit expenses and other ancillary charges of $36.1 million and expects to record an additional $1.5 million during the remainder of 2023. The Company paid approximately $2.5 million of the aggregate expense and had $33.6 million accrued as of March 31, 2023, which is expected to be paid during the remainder of 2023. As of March 31, 2023, 137 employees have been terminated.

The Company continues to evaluate employee positions and locations for potential operating improvements and efficiencies, and may incur additional severance and related charges in the future.

QCS wind down

On September 16, 2022, the Company's Board of Directors approved an exit plan to wind down QCS as part of its ongoing efforts to focus on growth drivers and key markets and to streamline its operations. As part of the exit plan, during the third quarter of 2022, the Company notified approximately 330 employees of their employment termination and incurred severance costs and other benefits of approximately $12.7 million.

As of March 31, 2023, $1.5 million of severance costs and other benefits remained accrued and, based on the exit dates of the notified employees, is expected to be paid during the fourth quarter of 2023.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

~~A summary of changes in accrued restructuring balance is as follows (in millions):~~

As of As of
December 31, 2021 Charges Usage April 1, 2022
Employee separation charges $ 10.8 $ (0.5) $ (4.8) $ 5.5
Total $ 10.8 $ (0.5) $ (4.8) $ 5.5

The Other category primarily includes the gain from the sale of an office building. There were no new restructuring programs implemented and the activity during the quarter ended April 1, 2022 represented payments to employees whose employments were terminated during 2021.

~~The Company continues to evaluate employee positions and locations for potential efficiencies, and may incur additional charges in the future.~~

Note 6:5: Balance Sheet Information and Other Supplemental Disclosures

Goodwill

~~Goodwill~~

There was ~~an insignificant~~no change in the balance of goodwill from December 31, ~~2021~~2022 to ~~April 1, 2022 relating to the divestiture of a business.~~

March 31, 2023. Goodwill is tested for impairment annually on the first day of the fourth quarter or more frequently if events or changes in circumstances (each, a "triggering event") would more ~~likely than not~~likely-than-not reduce the ~~carrying~~fair value of ~~goodwill~~a reporting unit below its ~~fair~~carrying value. Management did not identify any triggering events during the quarter ended ~~April 1, 2022~~March 31, 2023 that would require an interim impairment analysis.

Inventory

Details of Inventory included in the Company’s Consolidated Balance Sheets are as follows (in millions):
As of
April 1, 2022 December 31, 2021
Inventories:
Raw materials $ 193.5 $ 174.2
Work in process 971.5 888.9
Finished goods 331.0 316.4
$ 1,496.0 $ 1,379.5

~~Other current assets~~

Assets classified as held-for-sale, consisting of properties and certain other assets, are required to be recorded at the lower of carrying value or fair value less costs to sell. Fixed assets of approximately $70 million have been classified as held-for-sale within other current assets as of April 1, 2022.


	As of
	March 31, 2023		December 31, 2022
Inventories:
Raw materials	$	271.3	$	236.8
Work in process	1,053.5		951.0
Finished goods	490.1		429.0
	$	1,814.9	$	1,616.8

Defined Benefit Plans

The Company recognizes the aggregate amount of all over-funded plans as assets and the aggregate amount of all underfunded plans as liabilities in its financial statements. As of ~~April 1, 2022,~~March 31, 2023, the net assets for the over-funded plans totaled $~~14.3~~13.5 million. The total accrued pension liability for underfunded plans was ~~$112.6~~$69.1 million, of which the current portion of ~~$0.2~~$1.5 million was classified as accrued expenses and other current liabilities. As of December 31, ~~2021,~~2022, the net funded status for all the plans was a liability of ~~$103.9~~$53.8 million, of which the current portion of ~~$0.2~~$0.4 million was classified as accrued expenses and other current liabilities.

The components of the net periodic pension expense were as follows (in millions):

~~Table of Contents~~

~~ON SEMICONDUCTOR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(unaudited)~~


		Quarters Ended				Quarters Ended
		April 1, 2022		April 2, 2021				March 31, 2023		April 1, 2022
Service cost	Service cost	$	2.2	$	3.1		Service cost	$	1.2	$	2.2
Interest cost	Interest cost	1.1		1.1			Interest cost	1.6		1.1
Expected return on plan assets	Expected return on plan assets	(1.2)		(1.7)			Expected return on plan assets	(1.2)		(1.2)

Curtailment loss		—		1.9

Total net periodic pension cost	Total net periodic pension cost	$	2.1	$	4.4		Total net periodic pension cost	$	1.6	$	2.1

Leases

Operating lease arrangements are comprised primarily of real estate and equipment agreements. The components of lease expense were as follows (in millions):

Quarters Ended
April 1, 2022 April 2, 2021
Operating lease $ 11.2 $ 9.9
Variable lease 1.6 1.0
Short-term lease 0.4 0.7
Total lease expense $ 13.2 $ 11.6

~~The lease liabilities recognized in the Consolidated Balance Sheets are as follows (in millions):~~

As of
April 1, 2022 December 31, 2021
Operating lease liabilities included in:
Accrued expenses and other current liabilities $ 35.1 $ 32.5
Other long-term liabilities 137.9 142.4
Total $ 173.0 $ 174.9
Operating ROU assets included in:
Other assets $ 169.7 $ 170.1
Financing lease liabilities included in:
Accrued expenses and other current liabilities $ 12.7 $ 12.7
Other long-term liabilities 10.2 10.2
Total $ 22.9 $ 22.9
Financing ROU assets included in:
Other assets $ 21.9 $ 22.3

As of April 1, 2022, the weighted-average remaining lease-terms were 8.3 years and 19.8 years and the weighted-average discount rates were 4.2% and 6.0% for operating and financing leases, respectively.


	Quarters Ended
	March 31, 2023		April 1, 2022
Operating lease	$	12.4	$	11.2
Variable lease	1.8		1.6
Short-term lease	0.5		0.4
Total lease expense	$	14.7	$	13.2

~~Supplemental Disclosure of Cash Flow Information~~

1413

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

The ROU assets and lease liabilities recognized in the Consolidated Balance Sheets are as follows (in millions):


	As of
	March 31, 2023		December 31, 2022
Operating lease liabilities included in:
Accrued expenses and other current liabilities	$	33.5	$	35.2
Other long-term liabilities	244.8		246.5
Total	$	278.3	$	281.7

Operating ROU assets included in:
Other assets	$	251.9	$	262.1


Current portion of financing lease liabilities	$	11.6	$	14.2
Long-term financing lease liabilities	24.0		23.0
Total	$	35.6	$	37.2

Right-of-use financing lease	$	45.2	$	45.8

As of March 31, 2023, the weighted-average remaining lease-terms were 10.8 years and 18.8 years, and the weighted-average discount rates were 4.8% and 6.0%, for operating and financing leases, respectively.

Supplemental Disclosure of Cash Flow Information

Certain of the Company's cash and non-cash activities were as follows (in millions):


		Quarters Ended				Quarters Ended
		April 1, 2022		April 2, 2021				March 31, 2023		April 1, 2022
Non-cash investing activities:	Non-cash investing activities:						Non-cash investing activities:
Capital expenditures in accounts payable and other long-term liabilities	Capital expenditures in accounts payable and other long-term liabilities	$	225.4	$	180.9		Capital expenditures in accounts payable and other long-term liabilities	$	388.8	$	225.4

Operating ROU assets obtained in exchange of lease liabilities	Operating ROU assets obtained in exchange of lease liabilities	10.7		7.1			Operating ROU assets obtained in exchange of lease liabilities	4.6		10.7

Cash paid for:	Cash paid for:						Cash paid for:

Interest expense	Interest expense	$	24.0	$	31.4		Interest expense	$	29.1	$	24.0
Income taxes	Income taxes	15.7		20.9			Income taxes	35.2		15.7
Operating lease payments in operating cash flows	Operating lease payments in operating cash flows	11.0		10.3			Operating lease payments in operating cash flows	11.2		11.0

Reconciliation of the captions in the Consolidated Balance Sheets to the Consolidated Statements of Cash Flows (in millions):


		As of									As of
		April 1, 2022		December 31, 2021		April 2, 2021		December 31, 2020			March 31, 2023		December 31, 2022		April 1, 2022		December 31, 2021
Consolidated Balance Sheets:	Consolidated Balance Sheets:									Consolidated Balance Sheets:
Cash and cash equivalents	Cash and cash equivalents	$	1,645.1	$	1,352.6	$	1,042.5	$	1,080.7	Cash and cash equivalents	$	2,702.4	$	2,919.0	$	1,645.1	$	1,352.6
Restricted cash (included in other current assets)	Restricted cash (included in other current assets)	18.8		20.1		1.4		0.8		Restricted cash (included in other current assets)	14.2		14.0		18.8		20.1
Restricted cash (included in other non-current assets)	Restricted cash (included in other non-current assets)	5.0		5.0		—		—		Restricted cash (included in other non-current assets)	—		—		5.0		5.0
Cash, cash equivalents and restricted cash in Consolidated Statements of Cash Flows	Cash, cash equivalents and restricted cash in Consolidated Statements of Cash Flows	$	1,668.9	$	1,377.7	$	1,043.9	$	1,081.5	Cash, cash equivalents and restricted cash in Consolidated Statements of Cash Flows	$	2,716.6	$	2,933.0	$	1,668.9	$	1,377.7

As of ~~April 1, 2022, $15.0~~March 31, 2023, $5.8 million of the restricted cash balance ~~was held in escrow~~ relating to the acquisition of GTAT was held in escrow and will be released toduring the ~~former stockholders~~fourth quarter of ~~GTAT~~2023 upon satisfaction of certain outstanding items contained in the ~~acquisition agreement.~~Agreement and Plan of Merger relating to such acquisition.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Note 7:6: Long-Term Debt

The Company's long-term debt consists of the following (annualized interest rates, dollars in millions):


		As of					As of
		April 1, 2022		December 31, 2021			March 31, 2023		December 31, 2022
Amended Credit Agreement:	Amended Credit Agreement:					Amended Credit Agreement:
Revolving Credit Facility due 2024, interest payable monthly at 6.16% and 5.67%, respectively						Revolving Credit Facility due 2024, interest payable monthly at 6.16% and 5.67%, respectively	$	375.0	$	500.0
Term Loan "B" Facility due 2026, interest payable monthly at 6.91% and 6.42%, respectively						Term Loan "B" Facility due 2026, interest payable monthly at 6.91% and 6.42%, respectively	—		1,086.0
0.50% Notes due 2029 (1)						0.50% Notes due 2029 (1)	1,500.0		—
0% Notes due 2027						0% Notes due 2027	805.0		805.0
3.875% Notes due 2028 (2)						3.875% Notes due 2028 (2)	700.0		700.0

Term Loan "B" Facility due 2026, interest payable monthly at 2.46% and 2.10%, respectively		1,594.1		1,598.2
0% Notes due 2027		805.0		805.0
3.875% Notes due 2028 (1)		700.0		700.0

1.625% Notes due 2023 (2)		155.1		155.1
1.625% Notes due 2023 (3)						1.625% Notes due 2023 (3)	134.6		137.3
Gross long-term debt, including current maturities	Gross long-term debt, including current maturities	$	3,254.2	$	3,258.3	Gross long-term debt, including current maturities	$	3,514.6	$	3,228.3
Less: Debt discount (3)		(12.6)		(149.0)
Less: Debt issuance costs (4)		(35.8)		(34.7)
Less: Debt discount (4)						Less: Debt discount (4)	(4.7)		(9.2)
Less: Debt issuance costs (5)						Less: Debt issuance costs (5)	(45.7)		(25.6)
Net long-term debt, including current maturities	Net long-term debt, including current maturities	$	3,205.8	$	3,074.6	Net long-term debt, including current maturities	$	3,464.2	$	3,193.5
Less: Current maturities	Less: Current maturities	(170.4)		(160.7)		Less: Current maturities	(926.2)		(147.8)
Net long-term debt	Net long-term debt	$	3,035.4	$	2,913.9	Net long-term debt	$	2,538.0	$	3,045.7

(1)Interest is payable on March 1 and September 1 of each year at 0.50% annually.

(2)Interest is payable on March 1 and September 1 of each year at 3.875% annually.

~~(2)~~(3)Interest is payable on April 15 and October 15 of each year at 1.625% annually.

(4)Debt discount of $0.0 million and $4.2 million for the Term Loan "B" Facility and $4.7 million and $5.0 million for the 3.875% Notes, in each case as of March 31, 2023 and December 31, 2022, respectively.

(5)Debt issuance costs of $0.0 million and $9.7 million for the Term Loan "B" Facility, $30.7 million and $0.0 million for the 0.50% Notes, $13.1 million and $13.9 million for the 0% Notes, $1.7 million and $1.7 million for the 3.875% Notes and $0.2 million and $0.3 million for the 1.625% Notes, in each case as of March 31, 2023 and December 31, 2022, respectively.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

~~(3)~~Debt discount of $7.2 million and $7.5 million for the Term Loan "B" Facility and $5.4 million and $5.8 million for the 3.875% Notes, in each case as of April 1, 2022 and December 31, 2021, respectively. Debt discount of $126.1 million for the 0% Notes and $9.6 million for the 1.625% Notes, in each case as of December 31, 2021. No debt discount as of April 1, 2022 for 0% Notes and 1.625% Notes due to the adoption of ASU 2020-06.

~~(4)~~Debt issuance costs of $16.8 million and $17.7 million for the Term Loan "B" Facility, $16.3 million and $14.1 million for the 0% Notes, $1.9 million and $2.0 million for the 3.875% Notes and $0.8 million and $0.9 million for the 1.625% Notes, in each case as of April 1, 2022 and December 31, 2021, respectively.

Expected maturities of gross long-term debt (including current portion - see section regarding 1.625% and 0% Notes below) as of ~~April 1, 2022~~March 31, 2023 were as follows (in millions):


Period	Period	Expected Maturities		Period	Expected Maturities
Remainder of 2022		$	167.4
2023		16.3
Remainder of 2023				Remainder of 2023	$	939.6
2024	2024	16.3		2024	375.0
2025	2025	16.3		2025	—
2026	2026	1,532.9		2026	—
2027				2027	—
Thereafter	Thereafter	1,505.0		Thereafter	2,200.0
Total	Total	$	3,254.2	Total	$	3,514.6

The Company was in compliance with its covenants under all debt agreements as of ~~April 1, 2022.~~March 31, 2023.

~~Adoption~~0.50% Convertible Senior Notes due 2029

On February 28, 2023, the Company completed a private unregistered offering of ~~ASU 2020-06~~$1.5 billion aggregate principal amount of its 0.50% Convertible Senior Notes due 2029 (the "0.50% Notes"). The Company received net proceeds of approximately $1,470 million after deducting the initial purchasers' discount. The Company used the net proceeds to repay $1,086.0 million of the existing outstanding indebtedness under the Company’s Term Loan “B” Facility, the related transaction fees and expenses, to pay approximately $171.5 million net cost of the related convertible note hedges after such costs were offset by the proceeds from the sale of warrants, and for general corporate purposes. The 0.50% Notes were issued under an indenture (the "0.50% Indenture"), dated as of February 28, 2023, by and among the Company, the guarantors (as defined therein) and Computershare Trust Company, National Association, as trustee, which provides, among other things, that the 0.50% Notes will mature on March 1, 2029, unless earlier repurchased or redeemed by the Company or converted pursuant to their terms. On or after December 1, 2028, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 0.50% Notes may convert all or a portion of their 0.50% Notes at any time. The 0.50% Notes are the Company’s senior unsecured obligations and are fully and unconditionally guaranteed, on a joint and several basis, by each of the Company’s subsidiaries that is a borrower or guarantor under the Company’s Amended Credit Agreement. The Company may satisfy any conversion elections by paying cash up to the aggregate principal amount of the 0.50% Notes to be converted, and paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the 0.50% Notes to be converted.

The initial conversion rate of the 0.50% Notes is 9.6277 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $103.87 per share of common stock. The Company may redeem for cash all or any portion of the 0.50% Notes, at the Company’s option, on or after March 6, 2026, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading-day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides the related notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. Prior to December 1, 2028, the holders may convert their 0.50% Notes at their option only under the following circumstances: (i) during any calendar quarter commencing after the calendar quarter ending on June 30, 2023 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (ii) during the five consecutive business-day period after any five consecutive trading-day period in which the trading price per $1,000 principal amount of the 0.50% Notes for each trading day of such period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day; (iii) if the Company calls any or all of the 0.50% Notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; or (iv) upon the occurrence of specified corporate transactions described in the 0.50% Indenture.

The conversion rate is subject to adjustment upon the occurrence of certain specified events as set forth in the 0.50% Indenture. The maximum number of shares of common stock issuable in connection with the conversion of the 0.50% Notes is approximately 19.1 million. In addition to the initial purchasers' discount of $30.0 million, the Company also incurred issuance

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

costs of approximately $1.3 million, all of which was capitalized as debt issuance costs. The effective interest rate, including the impact of the debt discount and debt issuance costs is approximately 0.85% over the contractual term of the 0.50% Notes.

In addition, the Company entered into convertible note hedge transactions with respect to the common stock with the initial purchasers or their affiliates and certain other financial institutions. The Company will exercise the note hedges simultaneously when the 0.50% Notes are settled. The convertible note hedges cover, subject to customary anti-dilution adjustments, the number of shares of common stock that initially underlie the 0.50% Notes, and are expected to reduce the potential dilution to the common stock and/or offset potential cash payments in excess of the principal amount upon conversion of the 0.50% Notes. The Company paid approximately $414.0 million in cash for the convertible note hedges, which was recorded to stockholders’ equity.

The Company also entered into warrant transactions with certain other financial institutions, whereby the Company sold warrants to acquire 14.4 million shares of the Company's common stock, which is the same number of shares of the Company’s common stock covered by the convertible note hedges at an initial strike price of $156.78 per share, which represents a 100% premium over the closing price of the Company's common stock of $78.39 per share on February 23, 2023, subject to antidilution adjustments. The warrants expire on June 1, 2029. The maximum number of shares of common stock issuable in connection with the warrants is approximately 28.9 million. The Company received $242.5 million in cash for the sale of warrants, which was recorded to stockholders’ equity.

The Company recorded $92.3 million deferred tax asset related to the tax treatment of entering into the 0.50% Notes and the convertible note hedge.

Loss on debt prepayment

As ~~described in Note 3: Recent Accounting Pronouncements,~~mentioned above, with a portion of the proceeds of 0.50% Convertible Senior Notes due 2029, the Company ~~adopted ASU 2020-06 using~~repaid the remaining principal balance of $1.1 billion associated with its Term Loan "B" Facility. As a modified retrospective method and reduced additional paid-in capital by $129.1 million and increased opening retained earnings by $27.1 million to reflect the cumulative effect of adoption as of January 1, 2022. The applicationresult of the ~~if-converted method to determine the net income for diluted earnings~~prepayment, $13.3 million of unamortized debt discount and ~~diluted weighted-average shares of common stock outstanding did not have a meaningful impact~~issuance costs were expensed and recorded as loss on ~~the diluted net income per share of common stock~~debt prepayment.

Repayments under the ~~treasury stock method previously applied.~~Revolving Credit Facility

During the quarter ended March 31, 2023, the Company repaid $125.0 million of the outstanding balance under the Revolving Credit Facility. As of March 31, 2023, the Company had approximately $1.6 billion available under the Revolving Credit Facility for future borrowings, except for amounts utilized for the letters of credit.

1.625% Notes due 2023

~~The~~Pursuant to the indenture governing the 1.625% Notes, as of March 31, 2023, the $134.4 million remaining outstanding principal amount of the 1.625% Notes, ~~amounting to $155.1 million,~~ net of unamortized issuance costs, ~~continues~~continued to be classified as a current portion of long-term debt ~~as of April 1, 2022. Pursuant to the indenture governing the 1.625% Notes, because~~since the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on March 31, ~~2022~~2023 was greater than or equal to $26.94 (130% of the conversion price) on each applicable trading ~~day, the~~day. This condition gives holders ~~have~~ the right to surrender any portion of their 1.625% Notes (in minimum denominations of $1,000 in principal amount or an integral multiple thereof) for conversion during the calendar quarter ending June 30, ~~2022,~~2023, and only during such calendar quarter.

0% Notes due 2027

Pursuant to the indenture governing the 0% Notes, as of March 31, 2023, the $791.9 million outstanding principal amount of the 0% Notes, net of unamortized issuance costs, was classified as a current portion of long-term debt since the last reported sale price of the Company’s common stock for at least 20 trading days during the period of 30 consecutive trading days ending on March 31, 2023 was greater than or equal to $68.86 (130% of the conversion price) on each applicable trading day. This condition gives holders the right to surrender any portion of their 0% Notes (in minimum denominations of $1,000 in principal amount or an integral multiple thereof) for conversion during the calendar quarter ending June 30, 2023, and only during such calendar quarter.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Note 8:7: Earnings Per Share and Equity

Earnings Per Share

Net income per share of common stock for calculating basic and diluted earnings per share is calculated as follows (in millions, except per share data):


		Quarters Ended				Quarters Ended
		April 1, 2022		April 2, 2021				March 31, 2023		April 1, 2022
Net income for basic earnings per share of common stock	Net income for basic earnings per share of common stock	$	530.2	$	89.9		Net income for basic earnings per share of common stock	$	461.7	$	530.2
Add: Interest on 1.625% Notes	Add: Interest on 1.625% Notes	0.5		—			Add: Interest on 1.625% Notes	0.4		0.5
Net income for diluted earnings per share of common stock	Net income for diluted earnings per share of common stock	$	530.7	$	89.9		Net income for diluted earnings per share of common stock	$	462.1	$	530.7

Basic weighted-average shares of common stock outstanding	Basic weighted-average shares of common stock outstanding	433.3		413.4			Basic weighted-average shares of common stock outstanding	431.9		433.3
Dilutive effect of share-based awards	Dilutive effect of share-based awards	2.4		2.7			Dilutive effect of share-based awards	1.4		2.4
Dilutive effect of convertible notes and warrants	Dilutive effect of convertible notes and warrants	13.2		29.3			Dilutive effect of convertible notes and warrants	15.2		13.2
Diluted weighted-average shares of common stock outstanding	Diluted weighted-average shares of common stock outstanding	448.9		445.4			Diluted weighted-average shares of common stock outstanding	448.5		448.9

Net income per share of common stock:
Net income per share of common stock attributable to ON Semiconductor Corporation:							Net income per share of common stock attributable to ON Semiconductor Corporation:
Basic	Basic	$	1.22	$	0.22		Basic	$	1.07	$	1.22
Diluted	Diluted	$	1.18	$	0.20		Diluted	$	1.03	$	1.18

Basic income per share of common stock is computed by dividing net income for basic earnings by the weighted-average number of shares of common stock outstanding during the period. To calculate the diluted weighted-average shares of common stock outstanding, the treasury stock method has been applied to calculate the number of incremental shares from the assumed issuance of shares relating to RSUs. The excluded number of anti-dilutive share-based awards was ~~approximately~~ 0.2 million and ~~0.7~~0.2 million for the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ respectively.

The dilutive impacts related to the 0.50% Notes, 0% Notes and 1.625% Notes have been calculated using the if-converted method. ~~While~~The 0.50% Notes and the 0% Notes are repayable in cash up to the par value and in cash or shares of common stock for the excess over par value, while the 1.625% Notes are repayable in cash, or shares of common stock, or any combination of cash and shares of common stock at the election of the Company for their entire value. Prior to conversion, the convertible note hedges are not considered for purposes of the earnings per share calculations, as their effect would be anti-dilutive. Upon conversion, the convertible note hedges are expected to offset the dilutive effect of the 0.50% Notes, 0% Notes, and 1.625% Notes when the stock price is above $103.87, $52.97 and $20.72 per share, respectively.

The dilutive impact of the warrants issued concurrently with the issuance of the 0.50% Notes, 0% Notes and 1.625% Notes with exercise prices of $156.78, $74.34 and $30.70, respectively, has been included in the calculation of diluted weighted-average common shares outstanding, if applicable.

Equity

Share Repurchase Program

Under the Company's share repurchase program announced on ~~November 15, 2018~~February 6, 2023 (the "Share Repurchase Program"), the Company may repurchase up to ~~$1.5~~$3.0 billion (exclusive of fees, commissions and other expenses) of the Company's common stock ~~from December 1, 2018~~ through December 31, ~~2022. There were no repurchases~~2025.

The Company repurchased approximately 1.3 million shares of common stock for an aggregate purchase price of $104.0 million during the ~~quarters~~quarter ended ~~April 1, 2022 and April 2, 2021 under the Share Repurchase Program.~~March 31, 2023. As of ~~April 1, 2022,~~March 31, 2023, the authorized amount remaining under the Share Repurchase Program was ~~$1,295.8 million.~~approximately $2.9 billion.

~~Shares for Restricted Stock Units Tax Withholding~~

The amounts remitted for employee withholding taxes during the quarters ended April 1, 2022 and April 2, 2021 were $58.8 million and $28.5 million, respectively, for which the Company withheld approximately 1.0 million and 0.7 million shares of

1718

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Shares for Restricted Stock Units Tax Withholding

The amounts remitted for employee withholding taxes during the quarters ended March 31, 2023 and April 1, 2022 were $47.6 million and $58.8 million, respectively, for which the Company withheld approximately 0.6 million and 1.0 million shares of common stock, respectively, that were underlying the RSUs that vested. ~~None of these shares had been reissued or retired as of April 1, 2022, but may be reissued or retired in the future. These deemed repurchases in connection with~~This tax withholding ~~upon vesting were not made under the Share Repurchase Program, and the amounts spent in connection with such deemed repurchases did not reduce the authorized amount remaining under the~~activity is separate from our Share Repurchase Program.

Non-Controlling Interest in Leshan-Phoenix Semiconductor Company Limited (“Leshan”)

The results of Leshan have been consolidated in the Company's financial statements. As of December 31, ~~2021,~~2022, the non-controlling interest, which represents 20% of the Leshan balance, ~~was~~amounted to $18.5 million. This amount increased to $19.0 million ~~and, along with~~as of March 31, 2023, after including the ~~$0.8~~$0.5 million share of ~~the~~ earnings for the quarter ~~ended April 1, 2022, increased to $19.8 million as of April 1, 2022.~~ending March 31, 2023.

Note 9:8: Share-Based Compensation

Total share-based compensation expense related to the Company's RSUs, stock grant awards and the ESPP was recorded within the Consolidated Statements of Operations and Comprehensive Income as follows (in millions):


		Quarters Ended				Quarters Ended
		April 1, 2022		April 2, 2021				March 31, 2023		April 1, 2022
Cost of revenue	Cost of revenue	$	2.6	$	3.3		Cost of revenue	$	3.7	$	2.6
Research and development	Research and development	4.4		5.7			Research and development	4.5		4.4
Selling and marketing	Selling and marketing	3.8		4.3			Selling and marketing	4.1		3.8
General and administrative	General and administrative	11.7		9.0			General and administrative	15.4		11.7
Share-based compensation expense	Share-based compensation expense	$	22.5	$	22.3		Share-based compensation expense	$	27.7	$	22.5
Income tax benefit	Income tax benefit	(4.7)		(4.7)			Income tax benefit	(5.8)		(4.7)
Share-based compensation expense, net of taxes	Share-based compensation expense, net of taxes	$	17.8	$	17.6		Share-based compensation expense, net of taxes	$	21.9	$	17.8

As of ~~April 1, 2022,~~March 31, 2023, total unrecognized expected share-based compensation expense, net of estimated forfeitures, related to non-vested RSUs with service, performance and market conditions was ~~$157.6~~$149.4 million, which is expected to be recognized over a weighted-average period of ~~1.8~~1.7 years. Upon vesting of RSUs, stock grant awards or completion of a purchase under the ESPP, the Company issues new shares of common stock. The annualized pre-vesting forfeiture rate for RSUs was estimated to be 8% for the quarter ended March 31, 2023 and 6% for the quarter ended April 1, ~~2022 and 5% for the quarter ended April 2, 2021.~~2022.

Shares Available

As of ~~April 1, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, there was an aggregate of ~~39.9~~38.3 million and ~~42.2~~40.1 million shares of common stock, respectively, available for grant under the Amended and Restated SIP.

Restricted Stock Units

RSUs generally vest ratably over three years for awards with service conditions and over two or three years for awards with performance or market conditions, or a combination thereof, and are settled in shares of the Company's common stock upon vesting. A summary of the RSU transactions for the quarter ended ~~April 1, 2022~~March 31, 2023 is as follows (in millions, except per share data):

Number of Shares Weighted-Average Grant Date Fair Value Per Share
Non-vested RSUs at December 31, 2021 6.2 $ 28.60
Granted 1.5 60.66
Achieved 0.2 41.35
Released (2.9) 25.19
Forfeited (0.2) 32.66
Non-vested RSUs at April 1, 2022 4.8 40.83

1819

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Non-vested RSUs at December 31, 2022	3.8	$	46.56
Granted	0.9	77.85
Achieved	0.3	54.16
Released	(1.7)	42.12
Forfeited	(0.1)	48.33
Non-vested RSUs at March 31, 2023	3.2	58.00

Note ~~10:~~9: Commitments and Contingencies

Environmental Contingencies

~~There are no new material~~The Company has encountered and dealt with a number of environmental ~~contingencies subsequent~~issues over time relating to the ~~filing~~various locations that comprise its operations, and has incurred certain costs related to clean-up activities and environmental remediation efforts. In certain instances, the Company has been indemnified for such costs, often times from third parties who were the prior owners of such facilities. Any costs to the ~~2021 Form 10-K.~~Company in connection with such environmental matters have generally not been, and, based on the information available, are not expected to be material.

Financing Contingencies

In the ordinary course of business, the Company provides standby letters of credit or other guarantee instruments to certain parties initiated by either the Company or its subsidiaries, as required for transactions, including, but not limited to, material purchase commitments, agreements to mitigate collection risk, leases, utilities or customs guarantees. As of ~~April 1, 2022,~~March 31, 2023, the Company's Revolving Credit Facility included $15.0 million available for the issuance of letters of credit. There were $0.9 million in letters of credit outstanding under the Revolving Credit Facility as of ~~April 1, 2022,~~March 31, 2023, which reduced the Company's borrowing capacity. As of ~~April 1, 2022,~~March 31, 2023, the Company also had outstanding guarantees and letters of credit outside of its Revolving Credit Facility totaling ~~$13.4~~$16.5 million.

As part of obtaining financing in the ordinary course of business, the Company issued guarantees related to certain of its subsidiaries, which totaled $0.9 million as of ~~April 1, 2022.~~March 31, 2023. Based on historical experience and information currently available, the Company believes that it will not be required to make payments under the standby letters of credit or guarantee arrangements for the foreseeable future.

Indemnification Contingencies

~~There are no new material indemnification contingencies subsequent~~The Company is a party to a variety of agreements entered into in the ordinary course of business, including acquisition agreements, pursuant to which it may be obligated to indemnify the other parties for certain liabilities that arise out of or relate to the ~~filing~~subject matter of the ~~2021 Form 10-K.~~agreements. Some of the agreements entered into by the Company require it to indemnify the other party against losses due to IP infringement, property damage (including environmental contamination), personal injury, failure to comply with applicable laws, the Company’s negligence or willful misconduct or breach of representations and warranties and covenants related to such matters as title to sold assets. In the case of certain acquisition agreements, these agreements may require us to maintain such indemnification provisions for the acquiree’s directors, officers and other employees and agents, in certain cases for a number of years following the acquisition.

While the Company’s future obligations under certain agreements may contain limitations on liability for indemnification, other agreements do not contain such limitations and under such agreements it is not possible to predict the maximum potential amount of future payments due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under any of these indemnities have not had a material effect on the Company’s business, financial condition, results of operations or cash flows. Additionally, the Company does not believe that any amounts that it may be required to pay under these indemnities in the future will be material to the Company’s business, financial position, results of operations, or cash flows.

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Legal Matters

The Company is currently involved in a variety of legal matters that arise in the ordinary course of business. Based on information currently available, the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations or liquidity. The litigation process is inherently uncertain, and the Company cannot guarantee that the outcome of any litigation matter will be favorable to the Company.

Intellectual Property Matters

The Company faces risk of exposure from claims of infringement of the IP rights of others. In the ordinary course of business, the Company receives letters asserting that the Company’s products or components breach another party’s rights. Such letters may request royalty payments from the Company, that the Company cease and desist using certain IP, and/or request other remedies.

Note ~~11:~~10: Fair Value Measurements

Fair Value of Financial Instruments

~~The~~During the year ended December 31, 2022, the Company ~~invests~~began investing portions of its excess cash in different marketable

securities, which are classified as available-for-sale.

The Company uses the following fair value tier level hierarchy to determine fair values of its financial instruments:

• Level 1: based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets

• Level 2: based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability either

directly or indirectly.

• Level 3: based on the use of unobservable inputs for the assets and liabilities and other types of analyses.

The carrying value of cash and cash equivalents which includes time deposits, money market funds, corporate bonds and commercial paper approximates fair value because of the short-term maturity of these instruments. Demand and time deposits and money market funds are classified as Level 1 within the fair value hierarchy, while corporate bonds and commercial paper are classified as Level 2. The carrying amount of other current assets and liabilities, such as accounts receivable and accounts payable approximates fair value due to the short-term maturity of the amounts and are considered Level 2 in the fair value hierarchy.

The following table summarizes the Company's financial assets and liabilities, excluding pension assets, disaggregated by the security type, measured at fair value on a recurring basis (in millions):

1921

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)


As of April 1, 2022										Fair Value Level
As of March 31, 2023																As of March 31, 2023									Fair Value Level
Description	Description	Amortized Cost		Unrealized gains		Unrealized losses		Fair value		Level 1		Level 2		Level 3		Description	Amortized Cost		Unrealized gains		Unrealized losses		Fair value		Level 1		Level 2		Level 3
Assets:	Assets:															Assets:
Cash and cash equivalents:	Cash and cash equivalents:															Cash and cash equivalents:
Demand and time deposits	Demand and time deposits	$	19.6	$	—	$	—	$	19.6	$	19.6	$	—	$	—	Demand and time deposits	$	371.4	$	—	$	—	$	371.4	$	371.4	$	—	$	—
Money market funds	Money market funds	0.7		—		—		0.7		0.7		—		—		Money market funds	28.4		—		—		28.4		28.4		—		—

Other current assets:	Other current assets:															Other current assets:
Corporate bonds	Corporate bonds	$	22.3	$	—	$	—	$	22.3	$	—	$	22.3	$	—	Corporate bonds	$	15.2	$	—	$	—	$	15.2	$	—	$	15.2	$	—
Certificate of deposit	Certificate of deposit	3.0		—		—		3.0		—		3.0		—		Certificate of deposit	2.7		—		—		2.7		—		2.7		—
Commercial paper	Commercial paper	6.8		—		—		6.8		3.8		3.0		—		Commercial paper	2.2		—		—		2.2		0.2		2.0		—
US Treasury bonds	US Treasury bonds	0.7		—		—		0.7		—		0.7		—		US Treasury bonds	1.7		—		—		1.7		—		1.7		—

Other assets:	Other assets:															Other assets:
Corporate bonds	Corporate bonds	$	14.2	$	—	$	—	$	14.2	$	—	$	14.2	$	—	Corporate bonds	$	0.5	$	—	$	—	$	0.5	$	—	$	0.5	$	—

US Treasury bonds		1.2		—		—		1.2		—		1.2		—

The investments included in other assets have maturity dates ranging between one and five years.


As of December 31, 2021										Fair Value Level
As of December 31, 2022																As of December 31, 2022									Fair Value Level
Description	Description	Amortized Cost		Unrealized gains		Unrealized losses		Fair value		Level 1		Level 2		Level 3		Description	Amortized Cost		Unrealized gains		Unrealized losses		Fair value		Level 1		Level 2		Level 3
Assets:	Assets:															Assets:
Cash and cash equivalents:	Cash and cash equivalents:															Cash and cash equivalents:
Demand and time deposits	Demand and time deposits	$	19.5	$	—	$	—	$	19.5	$	19.5	$	—	$	—	Demand and time deposits	$	233.1	$	—	$	—	$	233.1	$	233.1	$	—	$	—
Money market funds	Money market funds	0.7		—		—		0.7		0.7		—		—		Money market funds	17.0		—		—		17.0		17.0		—		—
Corporate bonds		1.6		—		—		1.6		—		1.6		—
Commercial paper		2.0		—		—		2.0		—		2.0		—

Other current assets:	Other current assets:															Other current assets:
Corporate bonds	Corporate bonds	$	16.0	$	—	$	—	$	16.0	$	—	$	16.0	$	—	Corporate bonds	$	23.8	$	—	$	—	$	23.8	$	—	$	23.8	$	—
Certificate of deposit	Certificate of deposit	1.9		—		—		1.9		—		1.9		—		Certificate of deposit	3.1		—		—		3.1		—		3.1		—
Commercial paper	Commercial paper	5.0		—		—		5.0		3.0		2.0		—		Commercial paper	3.2		—		—		3.2		1.2		2.0		—
US Treasury bonds	US Treasury bonds	0.4		—		—		0.4		—		0.4		—		US Treasury bonds	2.1		—		—		2.1		—		2.1		—

Other assets:	Other assets:															Other assets:
Corporate bonds	Corporate bonds	$	19.7	$	—	$	—	$	19.7	$	—	$	19.7	$	—	Corporate bonds	$	0.8	$	—	$	—	$	0.8	$	—	$	0.8	$	—

US Treasury bonds		1.6		—		—		1.6		—		1.6		—

~~0Other~~Other

The carrying amounts of other current assets and liabilities, such as accounts receivable and accounts payable, approximate fair value based on the short-term nature of these instruments.

Fair Value of Long-Term Debt, including Current Portion

2022

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

The carrying amounts and fair values of the Company’s long-term borrowings were as follows (in millions):


		As of									As of
		April 1, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Carrying Amount		Fair Value		Carrying Amount		Fair Value			Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion (1)	Long-term debt, including current portion (1)									Long-term debt, including current portion (1)
0% Notes	0% Notes	$	788.7	$	1,077.7	$	664.8	$	1,183.1	0% Notes	$	791.9	$	1,306.2	$	791.1	$	1,057.8
0.50% Notes										0.50% Notes	1,469.3		1,572.8		—		—
1.625% Notes	1.625% Notes	154.3		474.0		144.6		513.6		1.625% Notes	134.4		517.6		137.0		417.8
3.875% Notes										3.875% Notes	693.6		641.1		693.3		618.3
Other long-term debt	Other long-term debt	2,262.7		2,137.8		2,265.2		2,245.5		Other long-term debt	375.0		377.0		1,572.1		1,549.2

(1) Carrying amounts shown are net of debt discount, if applicable, and debt issuance costs.

The fair values of the 3.875% Notes, 1.625% Notes, 0.50% Notes and 0% Notes were estimated based on market prices in active markets (Level 1). The fair value of the Term Loan "B" Facility was estimated based on discounting the remaining principal and interest payments using current market rates for similar debt (Level 2).

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Note ~~12:~~11: Financial Instruments

Foreign Currencies

As a multinational business, the Company engages in transactions that are denominated in a variety of currencies. When appropriate, the Company uses forward foreign currency contracts to reduce its overall exposure to the effects of currency fluctuations on its results of operations and cash flows. The Company’s policy prohibits trading in currencies for which there are no underlying exposures and entering into trades for any currency to intentionally increase the underlying exposure. The Company primarily hedges existing assets and liabilities associated with transactions currently on its balance sheet, which are undesignated hedges for accounting purposes. The Company is exposed to credit-related losses if counterparties to hedge contracts fail to perform their obligations. As of March 31, 2023, the counterparties to the Company’s hedge contracts were held at financial institutions that the Company believes to be highly-rated, and no credit-related losses are anticipated.

As of ~~April 1, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had net outstanding foreign exchange contracts with notional amounts of ~~$236.7~~$279.2 million and ~~$288.3~~$272.0 million, respectively. Such contracts were obtained through financial institutions and were scheduled to mature within one to three months from the time of purchase. Management believes that these financial instruments should not subject the Company to increased risks from foreign exchange movements because gains and losses on these contracts should offset losses and gains on the underlying assets, liabilities and transactions to which they are related.

The following summarizes the Company’s net foreign exchange positions in U.S. Dollars (in millions):


		As of									As of
		April 1, 2022				December 31, 2021					March 31, 2023				December 31, 2022
		Buy (Sell)		Notional Amount		Buy (Sell)		Notional Amount			Buy (Sell)		Notional Amount		Buy (Sell)		Notional Amount
Japanese Yen										Japanese Yen	69.5		69.5		27.0		27.0
Philippine Peso	Philippine Peso	56.9		56.9		67.1		67.1		Philippine Peso	49.4		49.4		63.9		63.9
Japanese Yen		51.0		51.0		33.2		33.2
Korean Won		38.9		38.9		44.1		44.1
Czech Koruna	Czech Koruna	24.7		24.7		15.0		15.0		Czech Koruna	40.4		40.4		41.7		41.7
Euro	Euro	12.9		12.9		65.9		65.9		Euro	39.5		39.5		26.0		26.0
Korean Won										Korean Won	20.0		20.0		35.7		35.7

Other Currencies - Buy	Other Currencies - Buy	46.6		46.6		58.7		58.7		Other Currencies - Buy	46.5		46.5		66.5		66.5
Other Currencies - Sell	Other Currencies - Sell	(5.7)		5.7		(4.3)		4.3		Other Currencies - Sell	(13.9)		13.9		(11.2)		11.2
		$	225.3	$	236.7	$	279.7	$	288.3		$	251.4	$	279.2	$	249.6	$	272.0

Amounts receivable or payable under the contracts ~~are included in other current assets~~were not material as of March 31, 2023 or ~~accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets.~~December 31, 2022. During the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~net of the impact of the hedge positions, the realized and unrealized foreign currency transactions totaled a ~~gain~~loss of $1.9 million and a gain of ~~$4.0~~$1.9 million, respectively. The realized and unrealized foreign currency transactions are included in other income (expense) in the Company's Consolidated Statements of Operations and Comprehensive Income.

~~Table of Contents~~

~~ON SEMICONDUCTOR CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued~~

~~(unaudited)~~

Cash Flow Hedges

All derivatives are recognized on the Company’s Consolidated Balance Sheets at their fair value and classified based on the applicable instrument's maturity date.

~~Foreign Currency Risk~~

The purpose of the foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies will be adversely affected by changes in exchange rates. The Company enters into forward contracts that are designated as a foreign currency cash flow hedge of a forecasted payment denominated in a currency other than U.S. Dollars. For the quarters ended April 1, 2022 and April 2, 2021, the Company did not have outstanding derivatives for its foreign currency exposure designated as cash flow hedges.

Interest Rate Risk

The Company uses interest rate swap contracts to mitigate its exposure to variable interest rate fluctuations. ~~During~~

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

As of March 31, 2023, the ~~quarter ended April 1,~~Company did not have any outstanding derivatives related to cash flow hedges as the Company terminated its interest rate swap agreements with a notional value of $500 million for fiscal years 2023 and 2024, respectively and received cash proceeds of $27.7 million (net of termination fees). The Company recognized $6.9 million of other income related to the termination of these agreements. As of March 31, 2023, approximately $20.7 million was recorded in Accumulated Other Comprehensive Income and will be amortized to income over a period of twenty-one months, which represents the remaining original period of the swap agreements. If the Company prepays the Revolving Credit Facility balance, the Company will release the corresponding amounts from Accumulated Other Comprehensive Income concurrently.

As of December 31, 2022, the Company had interest rate swap agreements for notional amounts ~~totaling $750.0 million.~~of $750 million, $500 million and $500 million for fiscal years 2022, 2023 and 2024, respectively. The fair value of these swaps totaled $36.0 million as of December 31, 2022. The Company did not identify any ineffectiveness with respect to the notional amounts of the interest rate swap contracts ~~outstanding~~effective as of ~~April 1, 2022~~December 31, 2022. These derivatives are recognized on the balance sheet at their fair value and ~~April 2, 2021.~~classified based on each instrument’s maturity dates.

See Note 13: ''Changes in Accumulated Other Comprehensive Loss'' for the effective amounts related to derivative instruments designated as cash flow hedges affecting accumulated other comprehensive loss and the Consolidated Statements of Operations

and Comprehensive Income for the quarter ended March 31, 2023.

Convertible Note Hedges

The Company entered into convertible note hedges in connection with the issuance of the 0% Notes, 0.50% Notes and 1.625% Notes. See Note 6: ''Long-Term Debt'' for additional information.

Other

As of ~~April 1, 2022,~~March 31, 2023, the Company had no outstanding commodity derivatives, currency swaps, options, or ~~options relating to either its debt instruments~~equity investments held at subsidiaries or ~~investments.~~affiliated companies. The Company does not hedge the value of its equity investments in its subsidiaries or affiliated companies.

The Company is exposed to credit-related losses if ~~counterparties to~~its hedge ~~contracts~~counterparties fail to perform their obligations. As of ~~April 1, 2022,~~March 31, 2023, the counterparties to the ~~Company’s~~Company's hedge contracts ~~were~~are held at financial institutions ~~that~~which the Company believes to be ~~highly-rated,~~highly rated, and no ~~credit-related~~credit related losses are anticipated.

Note ~~13:~~12: Income Taxes

The Company recognizes interest and penalties related to uncertain tax positions in tax expense on the Company's Consolidated Statements of Operations and Comprehensive Income. The Company had approximately ~~$1.5~~$4.3 million and ~~$3.0~~$2.7 million of net interest and penalties accrued as of ~~April 1,~~March 31, 2023 and December 31, 2022, ~~and April 2, 2021,~~ respectively. It is reasonably possible that ~~$64.2~~$68.2 million of its uncertain tax positions will be reduced in the next 12 months due to settlement with tax authorities or expiration of the applicable statute of limitations.

The Company maintains a partial valuation allowance on its U.S. state deferred tax assets and a valuation allowance on foreign net operating losses and tax credits in certain foreign jurisdictions, a substantial portion of which relate to Japan and Hong Kong net operating losses, which are projected to expire prior to utilization.

The Company is currently under IRS examination for the 2017 and 2018 tax ~~year.~~years. Tax years prior to 2017 are generally not subject to examination by the IRS. For state tax returns, the Company is generally not subject to income tax examinations for tax years prior to ~~2017.~~2018. The Company is also subject to routine examinations by various foreign tax jurisdictions in which it operates. With respect to jurisdictions outside the United States, the Company is generally not subject to examination for tax years prior to ~~2011.~~2012. The Company believes that adequate provisions have been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with the Company's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

2225

Table of Contents

ON SEMICONDUCTOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

(unaudited)

Note ~~14:~~13: Changes in Accumulated Other Comprehensive Loss

Amounts comprising the Company's accumulated other comprehensive loss and reclassifications are as follows (in millions):


		Currency Translation Adjustments		Effects of Cash Flow Hedges and Other Adjustments		Total			Currency Translation Adjustments		Effects of Cash Flow Hedges and Other Adjustments		Total
Balance as of December 31, 2021		$	(44.4)	$	3.8	$	(40.6)
Balance as of December 31, 2022								Balance as of December 31, 2022	$	(50.4)	$	27.2	$	(23.2)
Other comprehensive income (loss) prior to reclassifications	Other comprehensive income (loss) prior to reclassifications	(2.4)		17.3		14.9		Other comprehensive income (loss) prior to reclassifications	0.3		5.2		5.5
Amounts reclassified from accumulated other comprehensive loss	Amounts reclassified from accumulated other comprehensive loss	—		(0.7)		(0.7)		Amounts reclassified from accumulated other comprehensive loss	—		(11.9)		(11.9)
Net current period other comprehensive income (loss) ~~(1)~~	Net current period other comprehensive income (loss) ~~(1)~~	(2.4)		16.6		14.2		Net current period other comprehensive income (loss) ~~(1)~~	0.3		(6.7)		(6.4)
Balance as of April 1, 2022		$	(46.8)	$	20.4	$	(26.4)
Balance as of March 31, 2023								Balance as of March 31, 2023	$	(50.1)	$	20.5	$	(29.6)

~~(1) Effects of cash flow hedges are net of tax expense of $5.1 million for the quarter ended April 1, 2022.~~

Amounts reclassified from accumulated other comprehensive loss to the specific caption within Consolidated Statements of Operations and Comprehensive Income were as follows:


		Quarters Ended					Quarters Ended
		April 1, 2022		April 2, 2021		To caption			March 31, 2023		April 1, 2022		To caption

Interest rate swaps	Interest rate swaps	$	0.7	$	4.6	Interest expense		Interest rate swaps	$	(5.0)	$	0.7	Interest expense
Interest rate swaps terminations								Interest rate swaps terminations	(6.9)		—		Other Income
Total reclassifications	Total reclassifications	$	0.7	$	4.6			Total reclassifications	$	(11.9)	$	0.7

2326

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included in the ~~2021~~2022 Form 10-K and our unaudited consolidated financial statements for the fiscal quarter ended ~~April 1, 2022,~~March 31, 2023, which are included elsewhere in this Form 10-Q. This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks, uncertainties and other factors. Actual results could differ materially because of the factors discussed below or elsewhere in this Form 10-Q. See Part II, Item 1A. "Risk Factors" of this Form 10-Q and Part I, Item 1A. "Risk Factors" of the ~~2021~~2022 Form 10-K.

Executive Overview

onsemi Overview

We provide ~~industry leading~~industry-leading intelligent power and sensing solutions to help our customers solve ~~the most~~ challenging problems and create ~~cutting edge~~cutting-edge products for a better future. Our intelligent power technologies enable the electrification of the automotive industry that allows for lighter and longer-range electric vehicles, empowers efficient fast-charging systems and propels sustainable energy for the highest efficiency solar strings, industrial power and storage systems. Our intelligent power solutions for automotive allows customers to exceed range targets with lower weight and reduce system cost through efficiency. Our intelligent sensing technologies support the ~~next-generation~~next generation industry, allowing for smarter factories and buildings while also enhancing the automotive mobility experience with imaging and depth sensing that make advanced vehicle safety and automated driving systems possible.

onsemi’s intelligent power allows our customers to exceed range targets with lower weight and reduce system cost through efficiency. With our sensing integration, we believe onsemi’s intelligent power solutions achieve higher efficiencies compared to our peers and allow lower temperature operation, reducing cooling requirements, saving costs and minimizing weight while delivering the required power with less die per module and achieving higher range for a given battery capacity. onsemi’s intelligent sensing solutions offer proprietary features in smaller packages that support customers' use cases. We believe our intelligent sensing technology offers advanced features to achieve optimal results and our product integration drives improved efficiency. This performance is delivered in a smaller footprint while reducing system latency to increase safety and throughput by providing a proprietary feature set to solve different use cases.

~~We serve a broad base of end-user markets, including automotive, industrial and others which include communications, computing and consumer.~~ We believe the evolution of the automotive industry, with advancements in autonomous driving, ADAS, vehicle electrification, and the increase in electronics content for vehicle platforms, is reshaping the boundaries

of transportation. ~~With~~

Through sensing integration, we believe our ~~extensive portfolio~~intelligent power solutions achieve superior efficiencies compared to our peers. This integration allows lower temperature operation, and reduced cooling requirements, while saving costs and minimizing weight. In addition, our power solutions deliver power with less die per module, achieving higher range for a given battery capacity.

We serve a broad base of ~~AEC-qualified products, onsemi helps customers design high reliability solutions while delivering top performance. Within the~~end-user markets, with a primary focus towards automotive and industrial ~~space, onsemi is helping OEMs develop innovative products to navigate the ongoing transformation across energy infrastructure, factory automation~~ and ~~power conversion.~~including communications, computing and consumer.

As of ~~April 1, 2022,~~March 31, 2023, we were organized into the three operating and reportable segments of PSG, ASG and ISG.

Business Strategy Developments

Our primary focus continues to be on ~~gross margin and operating margin expansion, while at the same time achieving~~profitable revenue growth in our focused end-markets of automotive ~~industrial~~ and ~~communications~~industrial infrastructure, as well as ~~being opportunistic in other end-markets, including~~ obtaining longer-term supply arrangements with strategic end-customers. We are ~~also~~ focused on achieving efficiencies in our operating and capital expenditures. ~~While we believe we have made significant progress on gross margin and operating margin expansion,~~Additionally, we continue to rationalize our product portfolio ~~and have allocated capital, research and development investments and resources to accelerate growth in high-margin products and end-markets~~ by moving away from non-differentiated, non-strategic products, which ~~have~~in most cases had ~~historically~~ lower gross and operating margins.

2023 Business Realignment

In order to streamline our operations and achieve organizational efficiencies, we realigned our operating models in ASG and the Corporate Information Technology ("IT") organization during the first quarter of 2023. Under this business realignment, approximately 400 employees were notified of their employment termination, and we incurred severance and related charges of approximately $41.4 million. We continue to evaluate employee positions and locations for potential efficiencies and may incur additional severance and related charges in the future. For additional information, see Note 4: ''Restructuring, Asset Impairments and Other, Net'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.

0.50% Convertible Senior Notes due 2029

During the first quarter of 2023, we ~~divested~~completed the offering of $1.5 billion aggregate principal amount of our ~~six-inch front-end wafer manufacturing facility in Oudenaarde, Belgium~~0.50% Notes and ~~entered into a definitive agreement~~utilized the net proceeds along with cash generated from operations to ~~sell our eight-inch front-end wafer manufacturing facility in South Portland, Maine,~~ which ~~is expected~~were used (i) to ~~close during~~repay $1,086.0 million of the ~~second quarter~~existing outstanding indebtedness under the Company’s Term Loan “B” Facility and the related transaction fees and expenses, (ii) to pay approximately $171.5 million net cost of ~~2022. We are also exploring~~the related convertible note hedges after such costs were offset by the proceeds from the sale of certain other manufacturing facilities. We believe these actions, among others, will allow us to transition to a lighter internal fabrication model where our financial performance will be less volatilewarrants, and ~~not as heavily influenced by our internal manufacturing volumes. As actions are initiated to achieve our business strategy goals, we could incur accounting charges in the future.~~(iii) for general corporate purposes.

We are focused on sustainability as we drive a common theme across all markets. During 2021, onsemi announced its commitment to achieving net zero emissions by 2040. As we initiate steps to achieve our sustainability goals, additional

2427

Table of Contents

~~investments may be required in~~Repayments under the ~~future in connection with such actions, although the timing and amounts of such investments are uncertain at this time.~~

~~Impact of the Novel Coronavirus Disease 2019 (“COVID-19”) Pandemic on our Business~~

We have implemented proactive preventative protocols and updated our business practices in response to the ongoing COVID-19 pandemic. These changes are intended to safeguard our employees, contractors, suppliers and communities. While all of our global manufacturing sites and most of our distribution centers are currently operational, government mandates may order us to curtail production levels or temporarily suspend manufacturing or distribution operations in response to further outbreaks or new COVID-19 variants.Revolving Credit Facility

During the quarter ended March 31, 2023, we repaid $125.0 million of the outstanding balance under the Revolving Credit Facility.

~~Table of Contents~~

For additional information, see Note 6: ''Long-Term Debt'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.

Results of Operations

Quarter Ended ~~April 1, 2022~~March 31, 2023 compared to the Quarter Ended April ~~2, 2021~~1, 2022

The following table summarizes certain information relating to our operating results that has been derived from our unaudited consolidated financial statements (in millions):


		Quarters Ended							Quarters Ended
		April 1, 2022		April 2, 2021		Dollar Change			March 31, 2023		April 1, 2022		Dollar Change
Revenue	Revenue	$	1,945.0	$	1,481.7	$	463.3	Revenue	$	1,959.7	$	1,945.0	$	14.7
Cost of revenue (exclusive of amortization shown below)		983.7		960.5		23.2
Cost of revenue								Cost of revenue	1,042.2		983.7		58.5
Gross profit	Gross profit	961.3		521.2		440.1		Gross profit	917.5		961.3		(43.8)
Operating expenses:	Operating expenses:							Operating expenses:
Research and development	Research and development	156.8		173.6		(16.8)		Research and development	138.4		156.8		(18.4)
Selling and marketing	Selling and marketing	71.1		78.9		(7.8)		Selling and marketing	71.8		71.1		0.7
General and administrative	General and administrative	77.9		72.4		5.5		General and administrative	75.9		77.9		(2.0)

Amortization of acquisition-related intangible assets	Amortization of acquisition-related intangible assets	21.3		25.0		(3.7)		Amortization of acquisition-related intangible assets	15.0		21.3		(6.3)
Restructuring, asset impairments and other charges, net	Restructuring, asset impairments and other charges, net	(13.0)		42.5		(55.5)		Restructuring, asset impairments and other charges, net	51.5		(13.0)		64.5
Intangible asset impairment		—		2.9		(2.9)

Total operating expenses	Total operating expenses	314.1		395.3		(81.2)		Total operating expenses	352.6		314.1		38.5
Operating income	Operating income	647.2		125.9		521.3		Operating income	564.9		647.2		(82.3)
Other income (expense), net:	Other income (expense), net:							Other income (expense), net:
Interest expense	Interest expense	(21.6)		(33.4)		11.8		Interest expense	(26.4)		(21.6)		(4.8)
Interest income	Interest income	0.4		0.4		—		Interest income	17.1		0.4		16.7
Loss on debt prepayment								Loss on debt prepayment	(13.3)		—		(13.3)
Loss on divestiture of business								Loss on divestiture of business	(1.1)		—		(1.1)

Other income (expense)		2.1		4.5		(2.4)
Other income								Other income	4.7		2.1		2.6
Other income (expense), net	Other income (expense), net	(19.1)		(28.5)		9.4		Other income (expense), net	(19.0)		(19.1)		0.1
Income before income taxes	Income before income taxes	628.1		97.4		530.7		Income before income taxes	545.9		628.1		(82.2)
Income tax provision	Income tax provision	(97.1)		(7.1)		(90.0)		Income tax provision	(83.7)		(97.1)		13.4
Net income	Net income	531.0		90.3		440.7		Net income	462.2		531.0		(68.8)
Less: Net income attributable to non-controlling interest	Less: Net income attributable to non-controlling interest	(0.8)		(0.4)		(0.4)		Less: Net income attributable to non-controlling interest	(0.5)		(0.8)		0.3
Net income attributable to ON Semiconductor Corporation	Net income attributable to ON Semiconductor Corporation	$	530.2	$	89.9	$	440.3	Net income attributable to ON Semiconductor Corporation	$	461.7	$	530.2	$	(68.5)

Revenue

Revenue was ~~$1,945.0~~$1,959.7 million and ~~$1,481.7~~$1,945.0 million for the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ respectively, representing an increase of ~~$463.3~~$14.7 million, or approximately ~~31%~~1%. We had one customer, a distributor, whose revenue accounted for approximately ~~12.4%~~10.1% and ~~10.6%~~12.4% of our total revenue for the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ respectively.

Table of Contents

Revenue by operating and reportable segments was as follows (dollars in millions):


		Quarter Ended April 1, 2022		As a % of Total Revenue (1)		Quarter Ended April 2, 2021		As a % of Total Revenue (1)			Quarter Ended March 31, 2023		As a % of Total Revenue (1)		Quarter Ended April 1, 2022		As a % of Total Revenue (1)
PSG	PSG	$	986.7	50.7	%	$	747.0	50.4	%	PSG	$	1,012.8	51.7	%	$	986.7	50.7	%
ASG	ASG	689.3		35.4	%	531.5		35.9	%	ASG	592.8		30.2	%	689.3		35.4	%
ISG	ISG	269.0		13.8	%	203.2		13.7	%	ISG	354.1		18.1	%	269.0		13.8	%
Total revenue	Total revenue	$	1,945.0			$	1,481.7			Total revenue	$	1,959.7			$	1,945.0

(1) Certain amounts may not total due to rounding of individual amounts.

Revenue from PSG increased by ~~$239.7~~$26.1 million, or approximately 3%, for the quarter ended March 31, 2023 compared to the quarter ended April 1, 2022. The revenue from our Advanced Power Division increased by $96.6 million, which was partially offset by a decrease of $70.5 million in our Integrated Circuits, Protection and Signal Division. The increases were primarily driven by our continued ramp in SiC and other high-power automotive solutions, compared to the quarter ended April 1, 2022. The decrease in revenue generated by our Integrated Circuits, Protection and Signal Division was driven by planned customer product exits and reduced demand driven by lower end-market requirements for these products.

Revenue from ASG decreased by $96.5 million, or approximately 14%, for the quarter ended March 31, 2023 compared to the quarter ended April 1, 2022. The revenue from our Mobile, Computing and Cloud Division decreased by $109.5 million, which was partially offset by an increase of $18.0 million and $19.8 million, respectively, in our Automotive Division and Industrial Solutions Division driven by Foundry business through our new EFK location. The decrease in revenue generated by our Mobile, Computing and Cloud Division was influenced by our 2023 exit of our Quantenna business, planned end of life for targeted products as well as a general drop in end market demand for these products.

Revenue from ISG increased by $85.1 million, or approximately 32%, for the quarter ended ~~April 1, 2022~~March 31, 2023 compared to the quarter ended April 2, 2021. The revenue from our Advanced Power Division and our Integrated Circuits, Protection and Signal Division increased by $170.6 million and $69.1 million, respectively, primarily due to our strategy to focus on a product mix

~~Table of Contents~~

~~that yields higher margins and increase in average selling prices driven by improving economic conditions, compared to the quarter ended April 2, 2021.~~

~~Revenue from ASG increased by $157.8 million, or approximately 30%, for the quarter ended April~~ 1, 2022, compared to the quarter ended April 2, 2021. The revenue from our Automotive Division, Industrial Solutions Division and Mobile, Computing and Cloud Division increased by $55.2 million, $53.4 million and $43.2 million, respectively. The increases were primarily due to our strategy to focus on a product mix that yields higher margins and increase in average selling prices driven by strong market demand, compared to the quarter ended April 2, 2021.

~~Revenue from ISG increased by $65.8 million, or approximately 32%, for the quarter ended April 1, 2022 compared to the quarter ended April 2, 2021,~~ largely driven by an increase in revenue from our Automotive Sensing Division of ~~$62.2~~$90.9 million. The increase was due to ~~our strategy to focus on a product mix that yields higher margins, better~~an increase in demand for these products and an increase in average selling ~~prices.~~prices, compared to the quarter ended April 1, 2022.

Revenue by geographic location, based on sales billed from the respective country or region, was as follows (dollars in millions):


		Quarter Ended April 1, 2022		As a % of Total Revenue (1)		Quarter Ended April 2, 2021		As a % of Total Revenue (1)			Quarter Ended March 31, 2023		As a % of Total Revenue (1)		Quarter Ended April 1, 2022		As a % of Total Revenue (1)
Singapore	Singapore	$	555.7	28.6	%	$	509.0	34.4	%	Singapore	$	450.7	23.0	%	$	555.7	28.6	%
Hong Kong	Hong Kong	529.6		27.2	%	342.2		23.1	%	Hong Kong	490.4		25.0	%	529.6		27.2	%
United Kingdom	United Kingdom	345.5		17.8	%	268.9		18.1	%	United Kingdom	413.3		21.1	%	345.5		17.8	%
United States	United States	311.7		16.0	%	184.3		12.4	%	United States	389.1		19.9	%	311.7		16.0	%
Other	Other	202.5		10.4	%	177.3		12.0	%	Other	216.2		11.0	%	202.5		10.4	%
Total revenue	Total revenue	$	1,945.0			$	1,481.7			Total revenue	$	1,959.7			$	1,945.0

(1) Certain amounts may not total due to rounding of individual amounts.

Gross Profit and Gross Margin (exclusive of amortization of acquisition-related intangible assets)

Our gross profit by operating and reportable segments was as follows (dollars in millions):


		Quarter Ended April 1, 2022				As a % of Segment Revenue (1)			Quarter Ended April 2, 2021				As a % of Segment Revenue (1)				Quarter Ended March 31, 2023				As a % of Segment Revenue (1)			Quarter Ended April 1, 2022				As a % of Segment Revenue (1)

PSG	PSG			$	474.7		48.1	%			$	246.5		33.0		%	PSG		$	480.3		47.4	%			$	474.7		48.1	%
ASG	ASG	366.7				53.2	%		206.8				38.9	%	ASG		260.1				43.9	%		366.7				53.2	%
ISG	ISG	119.9				44.6	%		67.9				33.4	%	ISG		177.1				50.0	%		119.9				44.6	%
Total gross profit	Total gross profit	$	961.3			49.4	%		$	521.2			35.2	%	Total gross profit		$	917.5			46.8	%		$	961.3			49.4	%

(1)Certain amounts may not total due to rounding of individual amounts.

Our gross profit increased by $440.1 million, or approximately 84%, from $521.2 million for the quarter ended April 2, 2021 to $961.3 million for the quarter ended April 1, 2022. Our overall gross margin increased to 49.4% for the quarter ended April 1, 2022 from approximately 35.2% for the quarter ended April 2, 2021.

The significant increases in gross profit and gross margin were due to an increase in average selling prices and a favorable product mix with higher gross margins and improved manufacturing efficiencies. The favorable economic environment and significant improvement in demand in all end-markets, specifically in the automotive and industrial end-markets, contributed to increased demand and better pricing for our products. We were also able to pass most of the increases in input cost of raw materials and external manufacturing services to our customers.

~~Operating Expenses~~

Research and development expenses were $156.8 million for the quarter ended April 1, 2022, as compared to $173.6 million for the quarter ended April 2, 2021, representing a decrease of $16.8 million, or approximately 10%. The decrease was primarily due to a decrease in payroll-related expenses as a result of the restructuring programs implemented during 2021.

2729

Table of Contents

~~Selling~~

During the quarter ended March 31, 2023 our gross profit was $917.5 million and ~~marketing~~our gross margin was 46.8%, representing a decline of approximately $43.8 million and a 4.6% decrease compared to a gross profit of $961.3 million and a gross margin of 49.4% reported for the quarter ended April 1, 2022.

The decline in both gross profit and gross margin was primarily driven by start-up and ramp-up costs associated with the ramp up of our EFK facility and new products.

Operating Expenses

Research and development expenses were ~~$71.1~~$138.4 million for the quarter ended March 31, 2023, as compared to $156.8 million for the quarter ended April 1, 2022, ~~as compared to $78.9 million for the quarter ended April 2, 2021,~~ representing a decrease of ~~$7.8~~$18.4 million, or approximately ~~10%~~12%. The decrease was primarily due to a ~~decrease~~reduction in ~~payroll-related~~payroll, variable compensation and other expenses as a result of the restructuring programs implemented during ~~2021.~~the period.

Selling and marketing expenses were $71.8 million for the quarter ended March 31, 2023, as compared to $71.1 million for the quarter ended April 1, 2022, representing an increase of $0.7 million, or approximately 1%.

General and administrative expenses were $75.9 million for the quarter ended March 31, 2023, as compared to $77.9 million for the quarter ended April 1, 2022, ~~as compared to $72.4 million for the quarter ended April 2, 2021,~~ representing ~~an increase~~a decrease of ~~$5.5~~$2.0 million, or approximately 8%3%. The decrease was primarily due to a reduction in variable compensation and other expenses as a result of the restructuring programs implemented during the period.

Other Operating Expenses

Amortization of Acquisition-Related Intangible Assets

Amortization of acquisition-related intangible assets was $15.0 million for the quarter ended March 31, 2023, as compared to $21.3 million for the quarter ended April 1, 2022, ~~as compared to $25.0 million for the quarter ended April 2, 2021,~~ representing a decrease of ~~$3.7~~$6.3 million, or approximately ~~15%~~30%. The decrease in expense was ~~primarily~~ due to ~~full amortization~~the impairment of certain intangible assets recorded due to the QCS shutdown during the third quarter of ~~our~~2022 and a reduction in amortization expense as certain intangible technology-related assets ~~from our previous acquisitions during 2021.~~became fully amortized in 2022.

Restructuring, Asset Impairments and Other, Net

Restructuring, asset impairments and other, net was $51.5 million for the quarter ended March 31, 2023, as compared to a credit of $13.0 million for the quarter ended April 1, ~~2022, as compared~~2022. Amounts incurred during the quarter ended March 31, 2023 primarily related to ~~$42.5 million~~the business realignment that was announced in the first quarter of 2023. Amounts incurred for the quarter ended April ~~2, 2021. There~~1, 2022 were ~~no new restructuring programs implemented during the quarter ended April 1, 2022. The credit includes~~partially offset by a gain from the sale of an office ~~building. Amounts incurred for~~building in the first quarter ~~ended April 2, 2021 primarily relate to the 2021 involuntary severance plan. For additional information,~~of 2022. See Note 5:4: ''Restructuring, Asset Impairments and Other, Net'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form ~~10-Q.~~10-Q for additional information.

Interest Expense

Interest expense ~~decreased~~increased by ~~$11.8~~$4.8 million to $26.4 million during the quarter ended March 31, 2023, as compared to $21.6 million during the quarter ended April 1, ~~2022, as compared to $33.4 million during the quarter ended April 2, 2021.~~2022. The ~~decrease~~increase was primarily due to ~~a decrease~~an increase in our outstanding long-term debt ~~repayment~~balances and an increase in interest rates offset by effects of interest ~~bearing debt using the proceeds from 0% Notes and the lack of amortization of debt discount on our convertible notes due to the adoption of ASU 2020-06.~~rate swap agreements. Our average gross long-term debt balance (including current maturities) for the quarter ended ~~April 1, 2022~~March 31, 2023 was $3,371.4 million at a weighted-average interest rate of 3.1%, as compared to $3,256.3 million at a weighted-average interest rate of 2.7%~~, as compared to $3,512.5 million at a weighted-average interest rate of 3.8%~~ for the quarter ended April ~~2, 2021.~~1, 2022. The calculation of our weighted-average interest rates includes the effect of our interest rate swap agreements.

Loss on Debt Prepayment

We recorded loss on debt prepayment of $13.3 million during the quarter ended March 31, 2023. The loss is attributable to the unamortized debt discount and issuance costs written-off relating to the repayment of the Term Loan "B" Facility. See Note 6: ''Long-Term Debt'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q for additional information.

Table of Contents

Other Income (Expense)

During the quarter ended March 31, 2023, Other income (expense) ~~decreased by $2.4 million from~~resulted in an income of ~~$4.5~~$4.7 million ~~during the quarter ended April 2, 2021~~compared to an income of $2.1 million during the quarter ended April 1, 2022. The increase was primarily due to a gain resulting from the termination of interest rate swaps partially offset by transaction losses resulting from fluctuations in foreign currencies.

Income Tax Provision

We recorded an income tax provision of ~~$97.1~~$83.7 million and ~~$7.1~~$97.1 million for the quarters ended March 31, 2023 and April 1, 2022, ~~and April 2, 2021,~~ respectively, representing effective tax rates of ~~15.5%~~15.3% and ~~7.3%~~15.5%. The increase in our effective tax rate was substantially driven by the impact of discrete tax benefits in the prior year, relative to prior year pre-tax income. The prior year discrete benefits primarily related to releases in uncertain tax positions and net equity award windfalls.

For additional information, see Note ~~13:~~12: ''Income Taxes'' in the notes to the unaudited consolidated financial statements included elsewhere in this Form 10-Q.

Liquidity and Capital Resources

~~This section includes a discussion and analysis~~Overview

Our principal sources of liquidity are cash on hand, cash generated from operations, available borrowings under our Revolving Credit Facility as well as debt and/or equity issuances. In the near term, we expect to fund our cash requirements ~~contingencies, sources and uses of cash, operations, working capital and long-term assets and liabilities.~~

~~Contingencies~~

We are a party to a variety of agreements entered into in the ordinary course of business pursuant to which we may be obligated to indemnify other parties for certain liabilities that arise out of or relate to the subject matter of the agreements. Some of the agreements entered into by us require us to indemnify the other party against losses, including but not limited to, losses due to

~~Table of Contents~~

IP infringement, environmental contamination and other property damage, personal injury, our failure to comply with applicable laws, our negligence or willful misconduct or our breach of representations, warranties or covenants related to such matters as title to sold assets.

We face risk of exposure to warranty and product liability claims in the event that our products fail to perform as expected or such failure of our products results, or is alleged to result, in economic damage, bodily injury or property damage. In addition, if(including any ~~of our designed products are alleged to be defective, we may be~~amounts required to ~~participate in their recall. Depending on the significance~~satisfy our current portion of long-term debt) utilizing any ~~particular customer and other relevant factors, we may agree to provide more favorable rights to such customer for valid defective product claims.~~

We maintain directors’ and officers’ insurance policies that indemnify our directors and officers against various liabilities, including certain liabilities under the Exchange Act that might be incurred by any director or ~~officer in his or her capacity as such.~~

While our future obligations under certain agreements may contain limitations on liability for indemnification, other agreements do not contain such limitations, and under such agreements, it is not possible to predict the maximum potential amount of future payments due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by us under anya combination of these indemnities have not had a material effect on our business, financial condition, results of operations or cash flows, and we do not believe that any amounts that we may be required to pay under these indemnities in the future will be material to our business, financial condition, results of operations or cash flows.

See Note 10: ''Commitments and Contingencies'' in the notes to our unaudited consolidated financial statements under the heading "Legal Matters" included elsewhere in this Form 10-Q for possible contingencies related to legal matters. See also Part I, Item 1 "Business - Government Regulation" of the 2021 Form 10-K for information on certain environmental matters.

~~Sources and Uses of Cash~~

principal sources. Our balance of cash and cash equivalents was ~~$1,645.1 million~~$2.7 billion as of ~~April 1, 2022.~~ March 31, 2023, and the Revolving Credit Facility has approximately $1.6 billion available for future borrowings.

We require cash to: (i) fund our operating expenses, working capital requirements, outlays for strategic acquisitions and investments; (ii) service our debt, including principal and interest; (iii) conduct research and development; (iv) incur capital expenditures; and (v) repurchase our common stock.

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures to reflect the current market conditions and our projected sales and demand. Our ~~principal sources of liquidity~~capital expenditures are primarily directed towards manufacturing equipment and can materially influence our available cash for other initiatives. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

We believe that our cash on hand, cash generated from ~~operations, funds from external borrowings and equity issuances. In the near term, we expect to fund~~ our ~~primary cash requirements through cash generated from~~ operations and ~~with cash and cash equivalents on hand. We also have~~ the ~~ability to utilize our~~ Revolving Credit Facility ~~which has~~are adequate to meet our working capital requirements and other business needs for at least the next 12 months.

Operating Activities

Our long-term cash generation is dependent on the ability of our operations to generate cash. Our cash flows from operating activities were $408.9 million and $478.6 million for the quarters ended March 31, 2023 and April 1, 2022, respectively. The decrease of $69.7 million was primarily attributable to a reduction in net income driven by lower end-market requirements for our products

Our ability to maintain positive operating cash flows is dependent on, among other factors, our success in achieving our revenue goals and manufacturing and operating cost targets. Management of our assets and liabilities, including both working capital and long-term assets and liabilities, also influences our operating cash flows.

Investing Activities

Our cash flows used in investing activities were $562.0 million and $129.4 million for the quarters ended March 31, 2023 and April 1, 2022, respectively. The increase of $432.6 million was primarily attributable to capital expenditures and the remaining payment of $236.3 million related to the acquisition of the EFK facility. During the quarters ended March 31, 2023 and April 1, 2022, we paid $321.5 million and $173.8 million, respectively, for capital expenditures. Our capital expenditures as a percent of revenue in the first quarter of 2023 increased to approximately ~~$1.97~~16%, primarily as a result of the SiC expansion and our facility expansion investments. As a result of these investments, for 2023, we expect capital expenditures to be approximately 18% to 20% of revenue.

Table of Contents

Financing Activities

Our cash flows used in financing activities were $63.4 million and $57.3 million for the quarters ended March 31, 2023 and April 1, 2022, respectively. The increase of $6.1 million was primarily attributable to proceeds and payments related to long-term borrowings and share repurchase activity. Cash used in financing activities includes repayments of outstanding indebtedness under the Company’s Term Loan “B” Facility of $1.1 billion ~~available~~and $125.0 million under the Revolving Credit Facility. The Company also paid approximately $414 million for ~~future borrowings.~~convertible note hedges and approximately $104.0 million for the repurchase of common stock, offset by $1.5 billion of proceeds from the private unregistered offering of our 0.50% Notes and $242.5 million of proceeds from the issuance of warrants.

See Note 6: ''Long-Term Debt'' and Note 7: ''Earnings Per Share and Equity'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q for additional information.

Key Factors Potentially Affecting Liquidity:

We believe that the key factors that could adversely affect our internal and external sources of cash ~~include:~~include, among other considerations:

•~~changes~~Changes in demand for our products, ~~including as a result of the COVID-19 pandemic,~~ competitive pricing pressures, supply chain constraints, effective management of our manufacturing capacity, our ability to achieve further reductions in operating expenses, our ability to make progress on the achievement of our business strategy and sustainability goals, the impact of our restructuring programs on our production and cost efficiency, and our ability to make the research and development expenditures required to remain competitive in our business; and

•~~our access to bank financing and the~~The debt and equity capital markets ~~that~~ could ~~impair~~impact our ability to obtain needed financing on acceptable terms or to respond to business opportunities and developments as they arise, including interest rate fluctuations, macroeconomic conditions, sudden reductions in the general availability of lending from banks or the related increase in cost to obtain bank financing and our ability to maintain compliance with covenants under our debt agreements in effect from time to time.

Our ability to service our long-term debt, including our 0% Notes, 3.875% Notes, 1.625% Notes, the Revolving Credit Facility and the Term Loan "B" Facility, to remain in compliance with the various covenants contained in our debt agreements and to fund working capital, capital expenditures and business development efforts will depend on our ability to generate cash from operating activities, which is subject to, among other things, our future operating performance and the timing of the full economic recovery from the COVID-19 pandemic, as well as financial, competitive, legislative, geopolitical, regulatory and other conditions, some of which may be beyond our control.

~~Table of Contents~~

If we fail to generate sufficient cash from operations, we may need to raise additional equity or borrow additional funds to achieve our longer-term objectives. There can be no assurance that such equity or borrowings will be available or, if available, will be at rates or prices acceptable to us.

During the ordinary course of business, we evaluate our cash requirements and, if necessary, adjust our expenditures for inventory, operating expenditures and capital expenditures to reflect the current market conditions and our projected sales and demand. Our capital expenditures are primarily directed towards manufacturing equipment, and can materially influence our available cash for other initiatives. During the quarters ended April 1, 2022 and April 2, 2021, we paid $173.8 million and $77.0 million, respectively, for capital expenditures. We expect our capital expenditures to be in the range of 12% to 14% of revenue in 2022 to expand our manufacturing capabilities to meet the market demands and further improve our manufacturing cost structure. Future capital expenditures may be impacted by events and transactions that are not currently forecasted.

~~Primary Cash Flow Sources~~

Our long-term cash generation is dependent on the ability of our operations to generate cash. Our cash flows from operating activities were $478.6 million and $218.5 million for the quarters ended April 1, 2022 and April 2, 2021, respectively. The increase of $260.1 million was primarily attributable to a significant increase in net income due to our strategy to focus on a product mix that yields higher margins combined with better economic conditions resulting in increased demand for our products. Our ability to maintain positive operating cash flows is dependent on, among other factors, our success in achieving our revenue goals and manufacturing and operating cost targets. Management of our assets and liabilities, including both working capital and long-term assets and liabilities, also influences our operating cash flows, and each of these components is discussed below.

~~Working Capital~~

Working capital, calculated as total current assets less total current liabilities, fluctuates depending on end-market demand and our effective management of certain items such as receivables, inventory and payables. Our working capital, excluding cash and cash equivalents and the current portion of long-term debt, was $1,326.6 million as of April 1, 2022, and has fluctuated between $1,326.6 million and $885.0 million at the end of each of our last eight fiscal quarters. Our working capital, including cash and cash equivalents and the current portion of long-term debt, was $2,801.3 million as of April 1, 2022, and has fluctuated between $2,801.3 million and $1,457.6 million at the end of each of our last eight fiscal quarters. We expect an increase in capital expenditures during 2022.

~~Long-Term Assets and Liabilities~~

Our long-term assets consist primarily of property, plant and equipment, intangible assets, deferred taxes and goodwill. Our manufacturing rationalization plans have included efforts to utilize our existing manufacturing assets and supply arrangements more efficiently. We have taken actions to add manufacturing capacity with the acquisition of GTAT during 2021 and with the expected completion of the acquisition of the East Fishkill, New York fabrication facilities and certain related assets and liabilities on or around December 31, 2022. In connection with divestiture activities, we have wafer supply agreements in place for a period of time such that there is no disruption in our current ability to meet the demand for our products.

Our long-term liabilities, excluding long-term debt and deferred taxes, consist of liabilities under our foreign defined benefit pension plans, operating lease liabilities and contingent tax reserves. With regard to our foreign defined benefit pension plans, our annual funding of these obligations is equal to the minimum amount legally required in each jurisdiction in which the plans operate. This annual amount is dependent upon numerous actuarial assumptions. For additional information, See Note 6: ''Balance Sheet Information and Other'' and Note 13: ''Income Taxes'' in the notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.

~~Key Financing and Capital Events~~

~~Overview~~

Over the past several years, we have undertaken various measures to secure liquidity to pursue acquisitions, repurchase shares of our common stock, reduce interest costs, amend existing key financing arrangements and, in some cases, extend a portion of our debt maturities to continue to provide us additional operating flexibility.

~~Table of Contents~~

~~Cash Management~~

Our ability to manage cash is limited, as our primary cash inflows and outflows are dictated by the terms of our sales and supply agreements, contractual obligations, debt instruments and legal and regulatory requirements. While we have some flexibility with respect to the timing of capital equipment purchases, we must invest in capital equipment on a timely basis to allow us to maintain our manufacturing efficiency and support our platforms for new products.

Debt Guarantees and Related Covenants

As of ~~April 1, 2022,~~March 31, 2023, we were in compliance with the indentures relating to our 0% Notes, 0.50% Notes, 3.875% Notes and 1.625% Notes, and with covenants relating to our Term Loan "B" Facility and Revolving Credit Facility. The 0% Notes, 0.50% Notes, 3.875% Notes and 1.625% Notes are senior to the existing and future subordinated indebtedness of onsemi and its guarantor subsidiaries, rank equally in right of payment to all of our existing and future senior debt and, as unsecured obligations, are subordinated to all of our existing and future secured debt to the extent of the assets securing such debt.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, see our ~~2021~~Annual Report on Form 10-K ~~and Note 3: "Recent Accounting Pronouncements" in~~for the ~~notes to our unaudited consolidated financial statements included elsewhere in this Form 10-Q.~~year ended December 31, 2022, which was filed with the SEC on February 6, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in market risk from the information presented in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” in the ~~2021~~2022 Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were

Table of Contents

effective to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

We also carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended ~~April 1, 2022.~~March 31, 2023.

There have been no changes to our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended ~~April 1, 2022~~March 31, 2023 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3133

Table of Contents

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

See Note ~~10: "Commitments~~9: ''Commitments and ~~Contingencies"~~Contingencies'' under the heading "Legal Matters" in the notes to the consolidated unaudited financial statements included elsewhere in this Form 10-Q for additional information on our legal proceedings and related matters. See also Part I, Item 1 "Business - Government Regulation" of the ~~2021~~2022 Form 10-K for information on certain environmental matters.

Item 1A. Risk Factors

Our business, financial condition and results of operations are subject to a number of trends, risks and uncertainties. We review and, where applicable, update our risk factors each quarter. There have been no material changes from the risk factors disclosed in Part I, Item 1A of the ~~2021~~2022 Form 10-K.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes "forward-looking statements," as that term is defined in Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical facts, included or incorporated in this Form 10-Q could be deemed forward-looking statements, particularly statements about our plans, strategies and prospects under the heading "Management’s Discussion and Analysis of Financial Condition and Results of Operations." Forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," ~~"plans"~~"plans," "anticipates," "should" or ~~"anticipates,"~~similar expressions, or by discussions of strategy, plans or intentions. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. ~~Certain~~

Important factors that could ~~affect~~cause our ~~future~~actual results ~~or events~~to differ materially from those anticipated in the forward-looking statements are described under Part I, Item 1A "Risk Factors" in the ~~2021~~2022 Form 10-K, in this Form 10-Q and from time to time in our other SEC reports. Readers are cautioned not to place undue reliance on forward-looking statements. We assume no obligation to update such information, which speaks only as of the date made, except as may be required by law. ~~You~~Investing in our securities involves a high degree of risk and uncertainty, and you should carefully consider the trends, risks and uncertainties described in ~~those~~the aforementioned reports and subsequent reports filed with or furnished to the SEC before making any investment decision with respect to our securities. The risk factors described herein and in our 2022 Form 10-K are not all of the risks we may face. Other risks not presently known to us or that we currently believe are immaterial may materially affect our business. If any of the following trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline and you could lose all or part of your investment. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement.

3234

Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding repurchases of our common stock during the quarter ended ~~April 1, 2022:~~March 31, 2023:

~~Period~~ ~~(1)~~

~~Total Number of Shares Purchased~~

~~Average Price Paid per Share ($)~~

~~Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs~~

~~Approximate Dollar value of Shares that May Yet be Purchased Under the Plans or Programs (in millions) ($)~~

~~January 1, 2022 - January 28, 2022~~

—

~~1,295.8~~

~~January 29, 2022 - February 25, 2022~~

—

~~1,295.8~~

~~February 26, 2022 - April 1, 2022~~

—

~~1,295.8~~

~~Total~~

—


Period (1)	Total Number of Shares Purchased	Average Price Paid per Share ($)	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar value of Shares that May Yet be Purchased Under the Plans or Programs (in millions) ($)
January 1, 2023 - January 27, 2023	—	—	—	3,000.0
January 28, 2023 - February 24, 2023	123,481	76.76	48,479	2,996.0
February 25, 2023 - March 31, 2023	1,293,768	78.46	1,275,672	2,896.0
Total	1,417,249	78.31	1,324,151

(1) These time periods represent our fiscal month start and end dates for the first quarter of ~~2022.~~2023.

Shares withheld to satisfy statutory tax withholding requirements related to the vesting of share-based awards are not issued or considered repurchases of our common stock under our Share Repurchase Program and, therefore, are excluded from the table above.

Share Repurchase Program

~~Under~~In February 2023, the ~~Share~~Board of Directors approved a new share repurchase program (the “Share Repurchase ~~Program, we may~~Program”), which allows for the repurchase ~~up to $1.5 billion (exclusive~~ of fees, commissions and other expenses) of our common stock from December 1, 2018 through December 31, 2022, subject to certain contingencies. Subject to the discretion of our board of directors, we may repurchase our common stock from time to time in privately negotiated transactions or open market transactions, including pursuant to a trading plan in accordance with Rule 10b5-1 and Rule 10b-18 of the Exchange Act, ~~and the timing~~or by any combination of such methods or other methods. The Share Repurchase Program, which does not require us to purchase any ~~repurchases and the actual number~~minimum amount of ~~shares repurchased depend on a variety~~our common stock, has an aggregate limit of ~~factors, including our stock price, corporate and regulatory requirements, restrictions under our debt obligations~~$3.0 billion from February 8, 2023 through December 31, 2025 (exclusive of fees, commissions and other expenses). Any repurchases will be at the Company’s discretion and will be subject to market conditions, the price of our shares and ~~economic conditions.~~ other factors. The share repurchase program may be modified, suspended or terminated by the Board of Directors at any time without prior notice.

There were no1.3 million shares of the Company's common stock repurchased under the Share Repurchase Program during the quarter ended ~~April 1, 2022.~~March 31, 2023. As of March 31, 2023, the authorized amount remaining under the Share Repurchase Program was approximately $2.9 billion.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

3335

Table of Contents

Item 6. Exhibits

EXHIBIT INDEX

Exhibit No.

Exhibit Description*

4.1

Indenture, dated as of February 28, 2023, among the Company, the guarantors party thereto and Computershare Trust Company, National Association (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated March 1, 2023)

4.2

Form of Global 0.50% Convertible Senior Note due 2029 (included in Exhibit 4.1)

10.1

Form of ~~Annual Restricted Stock Unit~~ ~~Award Agreement under~~Confirmation for Convertible Note Hedges (incorporated by reference to Exhibit 10.1 to the ~~ON Semiconductor Corporation Amended and Restated Stock Incentive Plan (2022 form agreement)(1)(2).~~Company’s Current Report on Form 8-K/A dated March 2, 2023)

10.2

Form of ~~Annual Performance-Based Restricted Stock Unit~~ ~~Award Agreement under~~Confirmation for Warrants (incorporated by reference to Exhibit 10.2 to the ~~ON Semiconductor Corporation Amended and Restated Stock Incentive Plan (2022 form agreement)(1)(2).~~Company’s Current Report on Form 8-K/A dated March 2, 2023)

10.3

Amended and Restated Employment Agreement, effective June 1, 2017, by and between Semiconductor Components Industries, LLC and George H. Cave (incorporated by reference to Exhibit 10.12 to the Company’sForm of Annual ~~Report on Form 10-K filed with the Commission on February 21, 2018)(2).~~

~~10.4~~

Performance-Based Restricted Stock ~~Units~~Unit Award Agreement under the ON Semiconductor Corporation Amended and Restated Stock Incentive Plan ~~(2021~~(2023 form ~~agreement for Tier I Employees) (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 3, 2021)~~agreement)(1)(2)

31.1

Certification by CEO pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002(1).

31.2

Certification by CFO pursuant to Rule 13(a)-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of Sarbanes-Oxley Act of 2002(1).

Certification by CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(3 ).

101.INS

XBRL Instance Document(1)

101.SCH

XBRL Taxonomy Extension Schema Document(1)

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document(1)

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document(1)

101.LAB

XBRL Taxonomy Extension Label Linkbase Document(1)

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document(1)

104

Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.


*			Reports filed under the Exchange Act (Form 10-K, Form 10-Q and Form 8-K) are filed under File No. 000-30419 and File No. 001-39317.
†			The Company has omitted certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K and, upon request by the Commission, agrees to furnish supplementally to the Commission a copy of any omitted schedule or exhibit.


(1)			Filed herewith.
(2)			Management contract or compensatory plan, contract or arrangement.
(3)			Furnished herewith.

3436

Table of Contents

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		ON SEMICONDUCTOR CORPORATION (Registrant)

Date:	May ~~2, 2022~~[XX], 2023	By:	/s/ THAD TRENT
			Thad Trent
			Executive Vice President, Chief Financial Officer and Treasurer
			(Principal Financial Officer and officer duly authorized to sign this report)

		By:	/s/ BERNARD R. COLPITTS, JR.
			Bernard R. Colpitts, Jr.
			Chief Accounting Officer
			(Principal Accounting Officer and officer duly authorized to sign this report)

3537


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share
Non-vested RSUs at December 31, 2021	6.2	$	28.60
Granted	1.5	60.66
Achieved	0.2	41.35
Released	(2.9)	25.19
Forfeited	(0.2)	32.66
Non-vested RSUs at April 1, 2022	4.8	40.83