ON Semiconductor Corporation (ON, Financial) has announced the approval of pre-tax non-cash impairment charges ranging from $600 million to $700 million. This decision is part of a broader restructuring plan and cost reduction initiatives that were initially revealed on February 24, 2025. The impairment charges pertain to long-lived assets, specifically investments in manufacturing equipment at certain ON Semiconductor manufacturing facilities, in accordance with held-for-sale accounting guidance.
The company is undertaking these actions following an evaluation of its current manufacturing technologies and capabilities. The goal is to realign internal manufacturing capacity and capabilities with anticipated long-term needs. Management anticipates that these charges will lead to a reduction in the company's depreciation expense by approximately $30 million to $35 million in 2025.
Importantly, ON Semiconductor does not expect these charges to result in significant future cash expenditures, as most of the charges will be incurred in the first two quarters of 2025. The impairment charges were calculated as the difference between the carrying values of the long-lived assets and their estimated fair values, minus anticipated costs to sell these assets.
It is worth noting that the actual timing of asset disposition, fair values, disposal costs, and the related impact on depreciation expense may vary from current expectations due to the inherent nature of these estimates. Such differences could be material.
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