ON Semiconductor’s stock plummeted to its lowest point since March 2020 following the announcement of its largest-ever acquisition: an all-stock deal for Synaptics. CEO Hassane El-Khoury, appearing on CNBC’s “Squawk on the Street,” vigorously defended the strategic purchase, highlighting its role in expanding the company’s core business and pushing it into the physical AI market.
The company projects the acquisition will add $30 billion to its addressable market, reaching $243 billion by 2030, through Synaptics’ expertise in edge AI and wireless connectivity for applications like robotics and autonomous vehicles. El-Khoury emphasized the complementary nature of the deal and the absence of product overlap, reassuring investors about the strength of ON Semiconductor’s core operations.
Watch CEO El-Khoury’s interview on CNBC
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ON Semiconductor (ON) shares endured their most significant single-day decline since March 2020 after the company unveiled its largest acquisition to date: a strategic all-stock deal to purchase Synaptics. CEO Hassane El-Khoury quickly stepped in to defend the move, asserting its crucial role in expanding the company's core business.
The semiconductor giant, a key component supplier for the automotive sector, announced Thursday its intent to acquire Synaptics, an innovator in edge AI and wireless connectivity solutions. This acquisition is a bold play to seize opportunities within the burgeoning physical artificial intelligence market.
According to ON Semiconductor, this pivot into physical AI is projected to dramatically increase its addressable market by an additional $30 billion, reaching a staggering $243 billion by 2030.
Speaking on CNBC's "Squawk on the Street" on Friday, El-Khoury emphasized the strategic value: "That is the strategic value of it, complementary to everything we have done on a very strong foundation." He further noted that the acquisition will unlock new market segments, including a dedicated AI-centric compute platform.
ON Semiconductor's vision hinges on a future dominated by physical systems capable of real-time sensing and autonomous decision-making, such as advanced robotics and self-driving vehicles. Synaptics' Astra platform, with its AI processors and wireless connectivity, is expected to significantly enhance ON Semiconductor's Edge AI capabilities, enabling artificial intelligence to run directly on hardware.
"There is no overlap on the product, which is why this deal is very exciting from a [research and development] and a product perspective," El-Khoury assured, addressing potential concerns about redundancy.
The executive also provided an update on the company's data center business, affirming its smooth operation and acceleration. "The foundation that we have built is strong," he stated. "We will continue to deliver on that. We have no hesitation about our core business — that remains strong."
The acquisition is slated to conclude in mid-2027 and is anticipated to yield $200 million in annual synergies within 18 months of its closing.
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