Why ON Semiconductor Stock Slumped in October
Shares in ON Semiconductor (NASDAQ: ON) declined by a whopping 32.6% in October, according to data provided by S&P Global Market Intelligence. The move comes due to the deterioration in its end markets, confirmed by the company's third-quarter earnings report released toward the end of the month.
Chipmakers are known to be, and always will be, companies with highly cyclical earnings. As the economy grows, demand for chips grows, and they typically ramp capital spending as chip prices rise and profits boom. On the other hand, when its customers see a slowdown in their sales, the first thing they do is stop ordering chips as they scale back production, leaving chipmakers carrying too much capacity.
The latter dynamics can be seen in CEO Hassane El-Khoury's commentary on the earnings call. He lauded the completion of an expansion of the world's largest silicon carbide fabrication facility in Bucheon, South Korea.
Source Fool.com
