onsemi to sell Philippines and Pennsylvania plants in cost-cutting overhaul

onsemi said it will sell its Tarlac, Philippines, assembly-and-test site and its Mountain Top, Pennsylvania, wafer fab as part of a push to slim its manufacturing base and lift margins. The company said the divestitures fit its “Fab Right” strategy, which shifts capital toward the most competitive and scalable operations, and will generate about $35 million in annual cost savings, with the first benefit in 2027 and the full amount in 2028.

The two plants sit at different points in onsemi’s supply chain, which makes the sales strategically more than routine real estate moves. Tarlac has 115,000 square feet of cleanroom space on a 20-acre campus, and onsemi said it will remain in operation during the transition. The company also secured a long-term supply agreement tied to the sale, signaling that it wants to cut cost without shaking customer deliveries. Mountain Top is a 200mm wafer fab with 35,000 square feet of cleanroom space on an 84-acre campus; onsemi acquired it as part of Fairchild Semiconductor in 2016. The Mountain Top sale is not expected to close until January 2028, giving onsemi a long runway to transfer products and technologies.

For workers and the surrounding communities, the deals mark a reset rather than an immediate shutdown, but they also reinforce a pattern of retrenchment. onsemi said in June 2024 that it would consolidate nine sites and cut its global workforce by about 1,000 as part of the same footprint overhaul. That broader move followed years of restructuring under the company’s shift from “Fab Liter” to “Fab Right,” a program onsemi says is meant to optimize its asset base for efficiencies and best-in-class return on invested capital. In its 2023 annual report, the company said it had already improved operational efficiencies after divesting subscale fabs in 2022.

The financial logic is clear. onsemi’s revenue rose from $5.3 billion in 2020 to $8.3 billion in 2023, while non-GAAP operating income increased from $537 million to $2.7 billion over the same period, evidence that the company has already used portfolio pruning to improve earnings power. Investors initially focused on the near-term cost, with shares falling more than 3% in premarket trading even after a gain of nearly 75% this year. The market’s reaction suggests a simple read: onsemi is trying to protect margins and redeploy capital toward automotive, industrial and AI data center chips, but the divestitures may also reflect uneven demand in parts of the manufacturing footprint it no longer wants to carry. Silex Microsystems said it will pay $40 million for Mountain Top, a purchase that gives the Swedish MEMS specialist a U.S. manufacturing base with about 12,000 square meters of room for expansion.