ON Semiconductor’s CEO Hassane El-Khoury has defended the company’s decision to acquire Synaptics for $30 billion, aiming to expand into physical AI, despite a significant drop in ON Semiconductor’s stock price. The deal is expected to boost the company’s addressable market and enhance its Edge AI capabilities.
El-Khoury reassured investors about the strength of ON Semiconductor’s core business and stated that the acquisition is highly complementary to their existing foundation. The transaction is anticipated to close by mid-2027, with projected annual synergies of $200 million.
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ON Semiconductor's stock experienced its steepest decline since March 2020, following the announcement of its largest acquisition to date. Despite the market's negative reaction, CEO Hassane El-Khoury staunchly defended the company's strategic direction, particularly its expansion into the burgeoning field of physical artificial intelligence (AI).
The company revealed plans to acquire Synaptics, a provider of edge AI and wireless connectivity solutions, in an all-stock transaction valued at approximately $30 billion. This move is aimed at significantly broadening ON Semiconductor's reach in the AI sector, which the company projects will expand its addressable market by an additional $30 billion, reaching $243 billion by 2030.
"That is the strategic value of it, complementary to everything we have done on a very strong foundation," El-Khoury stated in an interview with CNBC's "Squawk on the Street." He emphasized that the acquisition is not only about expanding market share but also about integrating new capabilities that will enhance ON Semiconductor's existing product portfolio.
The deal is expected to unlock new market opportunities for ON Semiconductor, including the development of an AI-centric compute platform. The company is positioning itself to capitalize on a future where physical systems, such as robots and autonomous vehicles, are equipped with advanced sensing and real-time decision-making capabilities.
Synaptics' Astra platform, which leverages AI processors and wireless connectivity, is seen as a key asset that will significantly bolster ON Semiconductor's Edge AI capabilities. Edge AI refers to the process of running artificial intelligence algorithms directly on local hardware, reducing reliance on cloud computing and enabling faster response times.
El-Khoury reassured investors about the company's core business, stating, "There is no overlap on the product, which is why this deal is very exciting from a [research and development] and a product perspective." He also affirmed that ON Semiconductor's data center business is performing robustly and continues to accelerate, reinforcing confidence in the company's foundational strengths.
ON Semiconductor anticipates the acquisition to be finalized by mid-2027. The company projects that the integration of Synaptics will yield approximately $200 million in annual synergies within 18 months of closing. The company also released a video detailing the potential market expansion offered by the Synaptics deal, featuring CEO Hassane El-Khoury.
