Motorola Spin-off Switches ON

Electronic News, August 9, 1999 by Jerry Ascierto

Motorola Inc.'s Semiconductor Components Group last week officially declared independence, christening itself ON Semiconductor in the wake of its previously announced $1.6 billion dollar purchase by Texas Pacific Group.

The spin-off, with sales of $1.5 billion in 1998, claims to be the world's largest manufacturer of discrete, standard analog and standard logic devices. Based in Phoenix, Steve Hanson, Motorola's former senior vice president and general manager of the Components Group, will be ON Semiconductor's president.

"We've been working hard for the last year and a half to right-size the organization," Hanson said. "Being part of a large organization, the tendency is for a division to help fund a larger organizational structure. But everything we invest in going forward will be exclusively for us, everything will be more focused."

As part of that reorganization, ON spent the last 18 months restructuring its manufacturing efforts and forming focused joint ventures in China, the Czech republic and Slovakia. Additionally, the Group invested heavily in new analog, power MOSFET and ECL products, Hanson said.

Motorola's Semiconductor Product Division in May announced its intentions to sell the components group to Texas Pacific Group and the group's management team. Under terms of the transaction, Motorola received $1.6 billion in cash, notes and approximately 10 percent of the new company's stock.

"I think Texas Pacific Group got a bargain," said Will Strauss, analyst for market research firm Forward Concepts. "They only paid close to one year's revenue. They have a very good record of putting in new management and turning around companies that are moribund, like Zilog was at one time. And the game-plan here is take it public. In that sense, I think it's going to be a go."

Along with its brand unveiling, the new company confirmed its continued membership and support for the Low Voltage Alliance, a legacy multiple source agreement with Toshiba Corp. and Fairchild Semiconductor. ON also dedicated a 6-inch, 0.35-micron manufacturing and development center, named CDMC-West, formerly the property of Motorola's Semiconductor Products Sector, in Phoenix.

While ON looks to be leaner and meaner now that it's on its own, there are other advantages to having a former parent company as well-known as Motorola. Hanson said that ON has a two-year access to the Motorola brand name. "The relationship we have with our customers today pretty much reinforces us. They know the Motorola brand but more importantly, they know us as a supplier," he said.