WACC d'ON Semiconductor 2025 : Coût du Capital SiC
Le WACC d'ON Semiconductor est 9,7% — élevé en raison de l'intensité capitalistique du carbure de silicium. Analyse du bêta, du coût du capital et comparaison des pairs.
ON Semiconductor (NASDAQ: ON) is a high-growth semiconductor company that has undergone significant capital structure changes in recent years. For value investors building a DCF model, selecting the right discount rate is critical - and ON Semi's WACC reflects both its cyclical risk profile and its evolving balance sheet. ON Semi's current WACC stands at approximately 9.7%, with a sensitivity range of 8.4% to 11.0% depending on beta and equity risk premium assumptions.
How ON Semiconductor's WACC Is Calculated
ON Semiconductor's current WACC is approximately 9.7%. The cost of equity is 10.1%, derived from CAPM using an adjusted beta of 1.05, a risk-free rate of 4.15%, and an equity risk premium of 5.10%. The pre-tax cost of debt is approximately 4.25%, with an effective tax rate of around 13.7% - relatively low due to the company's international operations and R&D tax treatment. With equity representing approximately 93% of total capital and debt just 7%, the WACC is almost entirely driven by the cost of equity. A D/E ratio of 0.07 confirms this is a nearly debt-light capital structure relative to its asset base.
How ON Semi's Capital Structure Has Changed
ON Semiconductor has undergone a significant operational transformation since 2021, when a new leadership team began exiting low-margin commodity businesses to concentrate on power semiconductors and silicon carbide. This shift has improved gross margins materially and changed the company's risk profile. The capital structure has also evolved: debt levels, share buyback activity, and the reinvestment rate into high-capex SiC manufacturing have all moved. Any WACC figure for ON Semi should be verified against a current source - the pre-transformation balance sheet is no longer representative of the business investors are buying today.
The SiC Market and Its Effect on Beta
Silicon carbide semiconductors are a key enabling technology for electric vehicle powertrains and industrial power conversion systems. ON Semiconductor is one of a small number of vertically integrated SiC suppliers, which gives it significant long-term positioning but also ties its revenue trajectory closely to EV adoption rates and industrial capex cycles. A higher-growth, higher-capex business profile typically implies a higher beta than a mature analog chipmaker. Investors building a 10-year DCF for ON Semi should consider whether the current beta reflects the fully transformed business or is still anchored to the historical diversified product mix.
What This Means for Your DCF
For a growth-oriented semiconductor company like ON Semi, the WACC is particularly sensitive to beta. As the company has shifted toward higher-margin silicon carbide (SiC) products, its risk profile - and therefore its cost of equity - may shift too. Investors should update their discount rate assumptions as the business mix evolves.
Step-by-Step WACC Calculation for ON Semiconductor
ON Semiconductor's 9.7% WACC reflects the elevated risk premium that markets assign to cyclical semiconductor companies with heavy capital commitments. The CAPM calculation starts with the same risk-free rate as the broader market — 4.56% on the 10-year US Treasury — but the beta input is markedly higher than a payment network like Visa.
For ON Semi, a defensible beta estimate sits in the 1.40–1.50 range on a 5-year monthly regression, reflecting both its cyclical exposure to automotive and industrial end markets and the capital intensity of its SiC manufacturing buildout. Using a midpoint beta of 1.45 and an equity risk premium of 4.06%: cost of equity = 4.56% + 1.45 × 4.06% = 4.56% + 5.89% = 10.45%. Applying a slight mean-reversion adjustment (which nudges beta toward 1.35 over the long run) yields a more conservative cost of equity estimate of approximately 10.1%–10.6%, which is the range most analysts use.
ON Semi carries moderate debt — approximately 7% of total capital on a market-value basis. Pre-tax cost of debt is roughly 4.25%, reflecting investment-grade borrowing terms. With an effective tax rate of approximately 13.7% (lower than the US statutory rate due to international operations and R&D tax credits), the after-tax cost of debt = 4.25% × (1 − 0.137) = 3.67%. Plugging into the WACC formula: WACC = 0.93 × 10.2% + 0.07 × 3.67% = 9.49% + 0.26% = 9.75%, which rounds to the reported 9.7%. The debt component contributes less than 30 basis points — confirming that ON Semi's WACC is almost entirely driven by its equity risk profile, not its leverage.
The practical implication: if you believe ON Semi's beta will compress toward 1.2 as SiC revenues become more predictable and the EV cycle matures, the cost of equity would fall to roughly 9.5% and WACC would drop to approximately 8.9% — a difference that meaningfully changes intrinsic value in a 10-year DCF. Conversely, if EV demand disappoints and capex commitments cannot be scaled back quickly, beta could drift toward 1.6, pushing WACC above 11%.
How the SiC Transformation Changed ON Semi's Cost of Capital
Before ON Semiconductor's 2021 strategic pivot under CEO Hassane El-Khoury, the company was a broad-based analog and mixed-signal chipmaker with a beta that hovered near 1.2. It competed across automotive, industrial, consumer, and communications markets — a diversified mix that moderated earnings cyclicality and kept beta in line with the broader semiconductor sector average. The capex-to-revenue ratio was modest, typically around 8%, and the company generated relatively steady free cash flow.
The SiC transformation fundamentally changed this picture. To become a vertically integrated silicon carbide supplier, ON Semi committed to building its own SiC boule growth and wafer fabrication capacity — a multi-billion-dollar programme that pushed capex/revenue ratios from ~8% to ~18% within three years. This capital intensity creates operating leverage in both directions: when EV demand is strong and the fabs run near capacity, margins expand rapidly; when demand softens, fixed costs become a burden. That two-sided operating leverage is precisely what pushes beta higher, because the company's earnings become more volatile relative to the market cycle.
The result is that ON Semi now trades with a cost of capital materially above peers who have not made the same SiC commitment. Texas Instruments has capex intensity above 25% for its fab buildout programme, yet maintains a lower beta (~1.1) because its product portfolio is broadly diversified across thousands of part numbers selling into hundreds of end markets — no single theme like EV adoption can move its aggregate revenue by 20%. For ON Semi, SiC-related revenue is expected to represent 30–40% of total sales within a few years, making EV adoption rates a material driver of earnings. That concentration risk is priced into the beta and, by extension, into the 9.7% WACC.
Peer Comparison: ON Semi vs TI vs Analog Devices
The peer comparison reveals a nuanced picture. Texas Instruments actually has the highest capex intensity in the group — its multi-year fab buildout programme represents one of the largest capital commitments in the analog industry — yet its WACC remains the lowest at 8.1%. The explanation is product diversity: TI sells over 100,000 analog and embedded products into automotive, industrial, personal electronics, communications, and enterprise end markets. No single theme accounts for more than 20% of revenues. This diversification smooths earnings through economic cycles and keeps beta anchored near 1.1 even as capex climbs.
ON Semi's elevated WACC relative to TI and Analog Devices is therefore not primarily a function of leverage or absolute capex level — it reflects earnings concentration risk. If EV adoption accelerates and SiC achieves the 30–40% revenue share that ON Semi targets, the company's revenue base will become more predictable and beta should gradually compress, potentially pulling WACC toward 8.5%–9.0% over a 3–5 year horizon. If EV demand growth stalls — as happened in parts of 2023 and 2024 — the high-fixed-cost SiC manufacturing base creates downside earnings leverage that the market prices rapidly into the stock. This asymmetry is the central risk/reward trade-off in any ON Semi DCF.
Calculate Your Own Discount Rate for ON Semiconductor
Use the Worthmap WACC Calculator to build your own cost of capital model for ON Semi. Input your own beta estimate, risk-free rate, and capital structure weights to arrive at a discount rate calibrated to your assumptions.
As with any DCF, the WACC is one input in a larger model. For ON Semi, investors should also consider normalised earnings cycles, capex intensity, and the long-term trajectory of the EV and industrial end markets.