Onsemi is prioritizing limited chip supply for artificial intelligence data centers and industrial customers after its AI data center revenue jumped 175% in the third quarter, temporarily delaying some orders from automakers looking to replenish inventory.
The semiconductor company makes chips that control and convert electricity in electric vehicles, industrial equipment, and data centers. Stronger-than-expected demand from AI and industrial customers has prompted Onsemi to adjust how it allocates production capacity.
Onsemi’s third-quarter results showed revenue rising 11% from a year earlier to $1.72 billion, and adjusted earnings climbed to $0.90 per share from $0.63.
AI data center revenue reached $180 million, up 39% from the previous quarter. Management now expects roughly $620 million in AI data center revenue for 2026 and projects that figure will double in 2027 as additional products enter production.
Onsemi (ON) shares rose about 4.78% to $73.46 in afternoon trading on Nov. 3 following the results and the company’s announcement of an acquisition aimed at expanding its AI power management business.
Why AI data centers need more Onsemi power chips
Onsemi began shipping power semiconductors in larger volumes to several major AI computing platforms in the third quarter, including Google, CEO Hassane El-Khoury said during the company’s Nov. 2 earnings call.
The products include silicon carbide and silicon-based chips used in power supplies and other systems that deliver electricity to AI servers.
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AI processors require large amounts of electricity to operate. Before that power reaches the chips, it must be converted and regulated to meet the voltage requirements of different components inside a server.
Those conversions can waste energy and generate heat. Onsemi’s power semiconductors help manage the process, allowing data center operators to deliver electricity more efficiently to increasingly powerful AI systems.
The industry is also moving toward higher-voltage power distribution. Nvidia has outlined an 800-volt direct-current architecture designed to reduce the number of power-conversion stages needed in large AI data centers.
Onsemi is developing products to support that transition, including technology for converting high-voltage electricity into the lower voltages used by processors.
The company also announced an agreement on Nov. 2 to acquire Ferric, a developer of integrated voltage-regulator technology, for $600 million in cash, plus up to $175 million in additional payments tied to future revenue milestones.
Ferric’s technology combines several power management components into a compact package that can be placed closer to an AI processor. The design aims to reduce power losses and the space needed to deliver electricity to increasingly power-hungry chips.
Onsemi said the Ferric acquisition would raise its 2030 AI data center revenue target by $500 million to more than $3 billion.
The transaction is expected to close by the end of 2026, subject to customary conditions. Onsemi does not expect the deal to have a meaningful near-term financial impact.
Automakers face a temporary wait for inventory restocking
Onsemi’s automotive business generated $777 million in third-quarter revenue, down 1% from the previous quarter, according to its earnings presentation.
Automotive remains the company’s largest end market, accounting for about 45% of total quarterly revenue. By comparison, AI data centers contributed about 10%.
During the earnings call, El-Khoury said Onsemi continues to supply the chips automakers need for current vehicle production. But some customers have also been placing orders to rebuild inventories in preparation for future demand.
Onsemi has temporarily delayed part of those replenishment orders as it directs constrained production capacity toward AI data centers and industrial customers.
Management says chips needed to keep vehicle assembly lines running are still being supplied. Some additional orders intended to restore automakers’ inventory levels will be fulfilled later.
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Chief Financial Officer Thad Trent expects automotive revenue to decline by a high-single-digit percentage sequentially in the fourth quarter, reflecting the continued supply reallocation as well as the timing of customer deliveries.
Industrial revenue, meanwhile, rose 10% from the previous quarter to $467 million as demand improved for energy infrastructure and other industrial applications.
El-Khoury said the shift in production priorities is temporary and does not represent a change in Onsemi’s long-term automotive strategy.
The company expects additional capacity to become available in the first quarter of 2027, allowing it to resume the delayed inventory shipments. Management also expects automotive revenue growth to return toward its longer-term target next year.
The next test will be whether that added capacity arrives on schedule. Onsemi expects AI data center revenue to double in 2027, but it will also need to catch up on automakers’ delayed inventory orders without disrupting deliveries for current vehicle production.
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