ON Semiconductor (ON): Valuation in Focus After China Initiates New Investigations Targeting US Chipmakers

ON Semiconductor (ON) is once again in the spotlight after China announced not one but two investigations into the American semiconductor sector, directly targeting companies like ON. With both an anti-dumping probe on specific analog ICs and an anti-discrimination inquiry coinciding with tense US-China trade talks, investors suddenly have a lot more to weigh. For anyone watching ON, this turn of events is a fresh reminder of how sensitive chip stocks can be to global policy changes and new trade hurdles.

Looking back, ON Semiconductor’s momentum has clearly slowed this year. The stock is down about 20% year-to-date and has slipped 30% over the past year, even as the company reported solid operating margins and cash flow in its latest results. While global demand for intelligent power solutions in industrial and automotive markets is still growing, these new probes out of China have raised doubts around future demand and supply chain certainty at a time when markets were balancing ongoing technology investments and shifting geopolitical risks.

With shares under pressure and trade concerns now looming larger, the big question is whether ON is being unfairly discounted or if these risks truly call for a deeper valuation reset.

Most Popular Narrative: 13.9% Undervalued

The leading narrative on ON Semiconductor values the stock at a double-digit discount to fair value, based on optimistic projections for its earnings and margins over the next several years.

The company's strategic investments in silicon carbide (SiC), wide bandgap technologies, and advanced power management solutions for both automotive and AI data centers position it at the forefront of key structural growth markets. As these high-value products ramp, they are expected to enhance margins and drive long-term earnings growth.

Want to discover what is fueling this bullish fair value? The narrative hinges on bold margin improvement and a massive jump in profitability, but the exact roadmap is a surprise. Curious if analysts expect ON to become a market leader, or if there is a catch to these growth forecasts? Dive in to see which assumptions are shaping this eye-catching valuation.

Result: Fair Value of $57.53 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent underutilization of manufacturing capacity and intensifying competition in EV silicon carbide markets could present challenges to these optimistic growth assumptions.

Find out about the key risks to this ON Semiconductor narrative.

Another View: Market Comparison Raises Eyebrows

While the first approach suggests ON trades at a discount, a quick look at market-based comparisons tells a different story. This method points to ON being pricey relative to key rivals. So, which perspective gets it right?

See what the numbers say about this price — find out in our valuation breakdown.

Stay updated when valuation signals shift by adding ON Semiconductor to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own ON Semiconductor Narrative

If you think the story could unfold differently, or want to dig into the numbers on your own terms, you can craft your own take in just a few minutes with Do it your way.

A great starting point for your ON Semiconductor research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

Looking for More Smart Investment Ideas?

Don’t let opportunity pass you by. The Simply Wall Street Screener is your gateway to exciting stocks in every corner of the market. Here’s how to make your next move count:

• Spot tomorrow’s tech game-changers and fuel your portfolio by sifting through AI penny stocks.
• Capture income potential that stands out with dividend stocks with yields > 3%, and secure yields above 3% in your search for stability.
• Uncover bargains hiding in plain sight when you hunt for future standouts using undervalued stocks based on cash flows.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com