ON Semiconductor ON Business Risk Report

I. Market Risks

A. Fluctuations in demand for semiconductor products
ON Semiconductor is subject to the cyclical nature of the semiconductor industry, which experiences significant fluctuations in demand. Factors such as economic downturns, changes in consumer preferences, and technological shifts can drastically affect their sales volumes.

B. Intense competition within the semiconductor industry
The semiconductor industry is highly competitive, with numerous players vying for market share. ON Semiconductor competes with larger companies that may have more resources for research and development, marketing, and sales, potentially impacting its market position and profitability.

II. Operational Risks

A. Disruption in the supply chain
ON Semiconductor relies on a global network of suppliers for raw materials and components. Disruptions such as natural disasters, political instability, or pandemics can impede their supply chain, leading to production delays or increased costs.

B. Technological changes impacting production processes
The rapid pace of technological change in the semiconductor industry requires constant updates to production processes. Failure to keep pace can make ON Semiconductor’s operations less efficient or their products less competitive.

III. Financial Risks

A. Foreign exchange rate fluctuations
ON Semiconductor operates on a global scale, which exposes it to significant foreign exchange rate risk. Fluctuations can affect the company’s profitability and financial results, especially since many transactions are denominated in currencies other than the U.S. dollar.

B. Dependence on key suppliers for credit terms
The company’s financial stability can be affected by its reliance on favorable credit terms from its suppliers. Changes in these terms, such as shorter payment cycles or higher interest rates on deferred payments, could impact cash flows.

IV. Regulatory and Compliance Risks

A. Changes in government regulations affecting the semiconductor industry
Changes in government policies, including trade policies and environmental regulations, can significantly affect ON Semiconductor’s operations. These changes might necessitate costly adjustments in manufacturing and compliance frameworks.

B. Compliance with data protection and privacy laws
As a technology company, ON Semiconductor must adhere to stringent data protection and privacy laws across different jurisdictions. Non-compliance could lead to significant fines and damage to the company’s reputation.

V. Strategic Risks

A. Failure to innovate and keep up with technological advancements
ON Semiconductor’s competitiveness depends heavily on its ability to innovate and integrate the latest technologies into its products. Failure to do so could lead to a decline in market share and relevance within the industry.

B. Ineffective mergers and acquisitions strategy
The company’s strategy includes growth through mergers and acquisitions, which come with risks such as poor integration, cultural misalignment, or overvaluation of acquired entities, potentially impacting overall business performance.

VI. Cybersecurity Risks

A. Data breaches and cyber attacks
ON Semiconductor, like any major tech company, is susceptible to data breaches and cyber-attacks, which can lead to theft of intellectual property, exposure of customer and corporate data, regulatory penalties, and loss of consumer trust.

B. Protection of sensitive intellectual property
Protection of intellectual property is crucial for maintaining competitive advantage and securing client trust. The loss or unauthorized disclosure of IP can have long-lasting implications on its market standing and financial results.

Mitigation Strategies:

• Diversification of product portfolio to spread risk over different markets
• Robust risk management framework to identify, assess, and mitigate business risks
• Ongoing monitoring of market trends and regulatory changes to anticipate necessary adjustments
• Investment in cybersecurity measures to protect data and intellectual property
• Regular compliance audits to ensure adherence to laws and regulations across jurisdictions
• Strong supplier relationship management to ensure stability and favorable terms
• Strategic partnerships to drive innovation and market expansion