2020 ON Semiconductor ANNUAL REPORT

2020

ON Semiconductor ANNUAL REPORT

We are ON Semiconductor

ON Semiconductor is trusted by customers for our ability to help solve their most difficult design challenges. We have a market-leading product portfolio and systems expertise that enable us to provide customers with compelling solutions for their most demanding applications. We are proud of our talented and motivated worldwide teams, extensive intellectual property, global sales channel, strong customer relationships, a widely recognized brand and operational prowess.

Letter to Shareholders

With a focus on automotive and industrial, the fastest growing semiconductor end markets, we are excited about the opportunities in front of us to maximize value for our shareholders, customers and employees.

Our primary value driver will come from gross margin expansion and maintaining above-market revenue growth in our strategic markets, while being opportunistic in others. The company is focused on maximizing free cash flow to de-lever our balance sheet to remain a consolidator in the industry.

We are now working to streamline the organization and reduce complexity throughout the company. We will focus our investments on our high-margin products targeted at the fastest growing markets.

We believe our company's values, vision and mission will continue to provide opportunities for our employees to make a difference in building a successful global business. Our customers and suppliers value our supply chain, quality programs, ethical standards, human rights and environmental programs, and commitment to Diversity, Equity and Inclusion (DEI). They see this as a competitive advantage we hold and we will continue to work with our customers and stakeholders to turn this advantage into growth.

For a sixth consecutive year, the Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices, has awarded ON Semiconductor with one of the World's Most Ethical Company? designations. Our Environmental, Social and Governance (ESG) programs have been recognized by World Finance, Barron's, Newsweek, EcoVadis and other external stakeholders. Our Corporate Social Responsibility and Sustainability teams led the completion of our first assessment using the Sustainable Accounting Standards Board (SASB) framework and an initial assessment to the Task Force on Climate-related Financial Disclosures (TCFD) framework. These assessments indicate we have a strong foundation and we intend to continue developing robust ESG capabilities.

In 2020, we donated over $1.8 million through the ON Semiconductor Foundation and our global giving program to communities where we operate and where our employees live and work. We are particularly proud of the outpouring of generosity from our employees and giving programs, donations, in-kind goods and other support to our communities.

We are constantly driving to develop a diverse and inclusive workplace which benefits our company and enables us to successfully meet the needs of our global stakeholders ? shareholders, customers, suppliers and employees. These initiatives contributed to ON Semiconductor being included on the Bloomberg Gender Equality Index in 2020 and 2021, recognized as a Fairygodboss Best Technology Company for Women and listed as a Military Friendly Employer.

We would like to thank our worldwide teams for rising to the challenge this past year in driving business excellence through operational efficiencies and exceptional customer service, all under our company's ethical framework. We are excited as we define and implement a strategy for industry-leading performance going forward. We remain optimistic for our future as we build upon our strong foundation.

Hassane S. El-Khoury President and CEO ON Semiconductor

Alan Campbell Chair of the Board ON Semiconductor

Performance Graph

$500 $400 $300

Comparison of 5-Year Cumulative Total Return

SOX ON Semiconductor

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20

$200 $100

NASDAQ

ON Semiconductor $100 $130.2 $215.6 $165.5 $248.8 $334.0

SOX

$100 $136.6 $190.9 $174.1 $278.8 $421.3

NASDAQ Composite $100 $107.5 $138.8 $132.5 $179.2 $257.4

$0 Dec

Dec

Dec

Dec

Dec

Dec

15

16

17

18

19

20

The preceding graph shows a comparison of cumulative total stockholder returns for our common stock, the NASDAQ Stock Market Index for U.S. Companies and the Philadelphia Semiconductor Index (SOX) for the past five years. The graph assumes the investment of $100 on December 31, 2015, the last trading day of 2015. No cash dividends have been declared or paid on our common stock. Our common stock trades on the NASDAQ Global Select Market and the prices for our common stock used to calculate the stockholder returns set forth above reflect the prices as reported by such index. The performance shown is not necessarily indicative of future performance. Our closing price on the last trading day of 2020 was $32.73.

C E RTA I N F O RWA R D ? L O O K I N G S TAT E M E N T S

Certain statements in this Annual Report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," "plans," "should," or "anticipates," and similar expressions. All forward-looking statements in this Annual Report are made based on ON Semiconductor's current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. Among these factors are economic conditions and markets (including current financial conditions), exchange rate fluctuations, risks associated with decisions to expend cash reserves for various uses in accordance with ON Semiconductor's capital allocation policy such as debt prepayment, stock repurchases or acquisitions rather than to retain such cash for future needs, risks associated with ON Semiconductor's substantial leverage and restrictive covenants in ON Semiconductor's debt agreements that may be in place from time to time, and risks involving governmental regulation. Additional factors that could cause results to differ materially from those projected in the forward-looking statements are contained in ON Semiconductor's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other of ON Semiconductor's filings with the SEC. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. ON Semiconductor assumes no obligation to update such information, except as may be required by law.

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

? ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020

Or

` TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

(Commission File Number) 001-39317

ON SEMICONDUCTOR CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

36-3840979

(I.R.S. Employer Identification No.)

5005 E. McDowell Road Phoenix, AZ 85008 (602) 244-6600

(Address, zip code and telephone number, including area code, of principal executive offices)

Securities Registered Pursuant to Section 12(b) of the Act: Title of each class

Common Stock, par value $0.01 per share

Preferred Stock, Series B Junior Participating, Purchase Rights

Trading Symbol(s) ON N/A

Name of each exchange on which registered The Nasdaq Stock Market LLC The Nasdaq Stock Market LLC

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ? No ` Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ` No ? Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ? No ` Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (? 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ? No ` Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer Non-accelerated filer

? Accelerated filer

`

` Smaller reporting company

`

Emerging growth company

`

If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ` Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ` No ? Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ` No ? The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $7,783,044,394 as of July 3, 2020, based on the closing sales price of such stock on the Nasdaq Global Select Market. Shares held by executive officers, directors and persons owning directly or indirectly more than 10% of the outstanding common stock (as applicable) have been excluded from the preceding number because such persons may be deemed to be affiliates of the registrant. The number of shares of the registrant's common stock outstanding at February 10, 2021 was 411,881,071.

Documents Incorporated by Reference Portions of the registrant's Definitive Proxy Statement relating to its 2021 Annual Meeting of Stockholders, which is expected to be filed pursuant to Regulation 14A within 120 days after the registrant's fiscal year ended December 31, 2020, are incorporated by reference into Part III of this Form 10-K.

ON SEMICONDUCTOR CORPORATION FORM 10-K

TABLE OF CONTENTS

Part I

Item 1. Business

6

Business Overview

6

Revenue Generating Activities

7

Markets

11

Resources

14

Seasonality

16

Government Regulation

17

Human Capital Resources

17

Executive Officers of the Registrant

19

Available Information

21

Item 1A. Risk Factors

21

Item 1B. Unresolved Staff Comments

44

Item 2. Properties

44

Item 3. Legal Proceedings

45

Item 4. Mine Safety Disclosure

45

Part II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities

46

Item 6. Selected Financial Data

47

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

48

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

67

Item 8. Financial Statements and Supplementary Data

68

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

68

Item 9A. Controls and Procedures

68

Item 9B. Other Information

69

Part III

Item 10. Directors, Executive Officers and Corporate Governance

70

Item 11. Executive Compensation

70

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 70

Item 13. Certain Relationships and Related Transactions, and Director Independence

70

Item 14. Principal Accountant Fees and Services

70

Part IV

Item 15. Exhibits and Financial Statement Schedules

71

Item 16. Form 10-K Summary

80

Signatures

81

(See the glossary immediately following this table of contents for definitions of certain abbreviated terms)

2

ON SEMICONDUCTOR CORPORATION FORM 10-K

GLOSSARY OF SELECTED ABBREVIATED TERMS*

Abbreviated Term 1.00% Notes 1.625% Notes 3.875% Notes AC ADAS AEC AFCI AI Amended Credit Agreement

Amended and Restated SIP AMIS AP/Gateway Aptina AR/VR ASC ASIC ASSP ASU BCD CMOS CSP DC DFN DMOS DSP ECL EDI EEPROM EPA ESD ESPP

Defined Term

1.00% Convertible Senior Notes due 2020 1.625% Convertible Senior Notes due 2023 3.875% Senior Notes due 2028 Alternating current Advanced driver assistance systems Automotive Electronics Council Arc fault circuit interrupter Artificial intelligence Credit Agreement, dated as of April 15, 2016, as subsequently amended, by and among the Company, as borrower, the several lenders party thereto, Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and certain other parties, providing for the Revolving Credit Facility and the Term Loan "B" Facility ON Semiconductor Corporation Amended and Restated Stock Incentive Plan, as amended AMIS Holdings, Inc. Access point/gateway Aptina, Inc. Augmented reality/virtual reality Accounting Standards Codification Application specific integrated circuits Application specific standard product Accounting Standards Update Bipolar-CMOS-DMOS Complementary metal oxide semiconductor Chip scale package Direct current Dual-flat no-leads Double diffused metal oxide semiconductor Digital signal processing Emitter coupled logic Electronic data interface Electrically erasable programmable read-only memory Environmental Protection Agency Electrostatic discharge ON Semiconductor Corporation 2000 Employee Stock Purchase Plan, as amended

3

EV/HEV Exchange Act Fairchild

FASB FDA Freescale GaN GFCI HV IC IGBT IoT IP IPRD LDOs LED LIBO Rate

LiDAR LSI MCU MOSFET Motorola ODM OEM PC PRP Revolving Credit Facility

RF RSU SCI LLC

SEC Securities Act SensL SiC SiPM

Electric vehicles/hybrid electric vehicles Securities Exchange Act of 1934, as amended Fairchild Semiconductor International Inc., a wholly-owned subsidiary of ON Semiconductor Corporation Financial Accounting Standards Board U.S. Food and Drug Administration Freescale Semiconductor, Inc. Gallium nitride Ground fault circuit interrupter High voltage Integrated circuit Insulated-gate bipolar transistor Internet-of-things Intellectual property In-process research and development Low drop out regulator controllers Light-emitting diode A base rate per annum equal to the London Interbank Offered Rate as administered by the Intercontinental Exchange Benchmark Administration Light detection and ranging Large scale integration Microcontroller unit Metal oxide semiconductor field effect transistor Motorola Inc. Original device manufacturers Original equipment manufacturers Personal computer Potentially responsible party A $1.97 billion revolving credit facility created pursuant to the Amended Credit Agreement Radio frequency Restricted stock unit Semiconductor Components Industries, LLC, a wholly-owned subsidiary of ON Semiconductor Corporation Securities and Exchange Commission Securities Act of 1933, as amended SensL Technologies Ltd. Silicon carbide Silicon photomultipliers

4

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