Onsemi (ON) announced on Thursday it will cut about 1,000 employees from its global workforce as part of an effort to streamline operations and reduce costs.
The chipmaker has been facing challenges due to weak demand in the electric vehicle (EV) market and excess inventory at its customers.
In addition to the layoffs, Onsemi will consolidate nine sites and reassign or relocate an additional 300 employees over the course of 2025, according to a regulatory filing.
The chip supplier expects to incur approximately $65 million to $80 million in related charges for 2024 and 2025, covering severance payments, benefits expenses, and payroll taxes, with most of these charges occurring in 2024.
Onsemi management plans to reinvest a substantial portion of the generated savings into its continuing workforce and other business opportunities, “ultimately resulting in de-minimis changes to its future operating expense expectations,” analysts at Deutsche Bank said.
“Overall, we believe these actions are consistent with the company investing in targeted future growth opportunities, while optimizing the efficiencies of both its manufacturing and operating expense efforts,” they added.
Separately, analysts at Wells Fargo believe that Onsemi’s moves represent the company’s “long-term desire to outsource manufacturing, when possible” and plans to “drive a structurally higher long-term fab utilization across all cyclical conditions.”
Onsemi shares fell 1.5% at Friday’s market open.