By Katherine Hamilton

Onsemi is planning a 9% cut to its workforce as it tries maintain its pace of innovation amid a drop in demand and falling revenue.

is juggling the pressure to keep its innovation competitive while restructuring to address falling revenue.

The semiconductor company is trimming jobs and reducing its manufacturing footprint after it guided for a less optimistic start to 2025 than Wall Street had been expecting. Chief Executive Hassane El-Khoury is now trying to right-size finances while pushing forward enough innovation to stay competitive with Chinese rivals amid the artificial-intelligence boom.

The company said in a filing Tuesday it plans to cut 2,400 employees. Onsemi had 26,400 regular employees as of mid-February, according to an annual filing. The cuts are expected to save $105 million to $115 million annually once completed. Charges related to the lay-offs are anticipated to cost around $50 million to $60 million, and be recorded in 2025.

Onsemi's silicon carbide devices have beaten Chinese companies' products in terms of quality, but the Scottsdale, Ariz., company's challenge will be to keep up that level of performance as rivals develop, Benchmark analyst David Williams said.

Meanwhile, the automotive industry, which makes up about half of Onsemi's revenue, has experienced a multi-year slide in demand as rising car prices have deterred many inflation-wary customers from buying. Earlier this month, the company reported that fourth-quarter revenue fell 15% to $1.72 billion.

El-Khoury said the cuts aren't in research and development, just as he avoided trimming that area when he restructured at the start of his tenure in 2020. Instead, he is pausing side projects that would help the company scale up its business.

"We're reducing projects that don't impact the fundamentals of the company; don't impact the future of the company," El-Khoury said.

For example, El-Khoury said he isn't reducing structural information-technology investments, even though they would have been easy cuts, because it would limit the company's efficiency once demand is at full throttle.

"On the other side of it, we have to look different," he said. "We have to have the right focus. We have to have the right investments."

AI is one of the areas where Onsemi has to be ready for demand to soar, he said. Powering 112,000 GPUs requires about 12 million of Onsemi's power chips, the company said. As more AI projects ramp up, the demand to power them will rest on companies such as Onsemi.

"That's why we have to be able to pivot," El-Khoury said. "That's why the focus for me was not on cost reduction, but on restructuring, which means we will still be able to respond."

Write to Katherine Hamilton at katherine.hamilton@wsj.com

(END) Dow Jones Newswires

February 25, 2025 17:03 ET (22:03 GMT)

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