I'm glad it's working. We've got a big room that's been packed. Okay. All right, everybody, let's get started with the next meeting. We are very lucky to have onsemi here with us, the CEO, Hassane El-Khoury, as well as the CFO, Thad Trent. So, again, if you have any questions during this process, just raise your hand. I'll look up and call on you. Wait till the mic gets to you, 'cause this is all webcast. And just wave harder if I don't see you immediately. So Hassane and Thad, thank you again for coming, and so we've been starting most of these conversations with kind of just a snapshot and update on what you're seeing in the market as a whole right now, and we'll get into specific parts of your end markets and things.
But just from a macro perspective, you guys have taken a relatively conservative approach on kind of your core cyclical business, you know, silicon carbide aside. So what are you guys seeing is, whether it's geographically, demand side, inventory, those sorts of metrics?
Yeah, I mean, I'll give you some color, and Thad may have a few points to make. But look, it's no different than what we thought going into the year. You know, we had a very different posture. You know, you called it cautious. I call it cautiously optimistic. Technical term is puckered up. When we walked into the year, you know, we didn't plan for this huge recovery in the second half of 2023, and because of that, we made plans, and we ran our business with that in mind. So here we are now in the second half of the year, and it is as we expected. That's why you've seen our performance be very predictable.
We started making this preparation, actually, when we started seeing signs of kind of the market not being as hot as it was, you know, in 2021 and 2022, back in the second half of 2022. So we designed our own soft landing. So if you think, what does that mean? Well, you don't want to be faced with a softness in the market with elevated levels of inventory in the channel, for example. So we've been very, very active in managing channel inventory, right? You don't want to be caught blindsided by, while your manufacturing is maximum utilization because it's going to impact inventory when the material comes out at a lower revenue base, so your inventory days will balloon.
So you've seen us reduce starts or utilization, you know, down to the 70% already. You've seen us manage distribution inventory. You've seen us manage the business, and that put us back, you know, so performance so far and really outlook for the year in a very, very predictable arena.
Yeah, I think the only thing I would add there is that, like our auto and industrial, steady, strong, that's because of our EV penetration there, alternative energy on the industrial side. I think if you exclude those areas, and those grew nicely for us last quarter, and we think they're going to grow again this quarter. But I think if you exclude those and you look at the other pieces of our business, they got soft last year. You know, they got soft in Q2 of last year, and that's when we started taking the utilization down, and I think it's kind of gone sideways for really a year here after we went through, you know, a couple quarters of being soft. So that remains that way.
I think China, outside of EVs, is soft as well, and I don't think there's any surprises, you know, of what we're seeing.
So, a couple different follow-ups to that. I agree, you know, the non-core businesses, that might not be the fairest way to say it, the non-auto and industrial businesses, like you said, that they started weakening quite some time ago. Investors' main concern right now is that the next shoe to drop is going to be those core industrial and automotive sides of things. What are you seeing there? Do you agree that that is the next part of this rolling correction, or is there a reason why that wouldn't apply, either in general or to ON specifically?
Yeah, look, I will talk about it from both sides. For the industry in general, you have to believe, which we do, that the content is the reason a lot of the growth has been, and it actually applies to what we see. You know, I know a lot of people talk about, well, content growth, content growth, content growth, but in reality, take for example, our content. We have $50 worth of content in a internal combustion engine, $750 in EV. This is on the drivetrain side. So mathematically, you can have 10 less cars in internal combustion and one car of EV, and for us to be flat, grow slightly. Just mathematically, that's the content growth story for us specifically, and that applies to some of our peers.
So that puts us on a very different trajectory, number one. The other thing about, you know, the talk about, well, that's the next shoe to drop because there's inventory. You know, you hear all of these anecdotes in the market. I can't comment on other people's business, but for us, even in last year, while everything was constrained, we do have LTSAs. Our LTSAs were not for what our customers needed. What that means is, you know, customer needed 100%, whatever the volume is, we didn't have the capacity to give everybody what they need, so everybody got 70%-80%. So when you talk about 70%-80% from what the demand would have been last year, and demand dropped, let's say, 10% volume, we're still where we have been shipping run rate.
So that's why we're not seeing it, because we took, again, a very cautious approach in the last few years of where the demand is going to be. So there wasn't that elevated inventory, and in fact—you know, we signed over $4 billion of LTSAs since the beginning of the year last quarter. So if you think about in a softer market, why would a customer commit to another five years or another two years on top of that? Because some customers came and wanted more because we haven't been shipping 100, now they want it. And then we have other companies that saw the benefit.
We have companies who didn't have an LTSA, and now with the volume back to where it needs to be, they came back and said, "Now I want to sign an LTSA if you have the capacity." So net-net, we're actually in a much better position with the visibility of our business than a lot of our peers, I think, based on, based on their commentary.
So if I was to summarize that, would you agree that you basically didn't overship, and so therefore, even if things do weaken in those core areas, you're not really seeing it?
Yeah. That, that's what I would say, yeah.
Gotcha.
Right.
Another example I see when I go through the model is, if you take your automotive business and you exclude the silicon carbide, whatever's left doesn't seem to be growing. It might have even shrunk sequentially the last couple of quarters. Same general framework in your industrial business, if you take out the energy infrastructure. Just conceptually, is that a fair way to look at what the non-growth areas within those segments would be doing?
Yeah, that's right. But in fact, if you take out silicon carbide, automotive grew slightly, actually. Year-on-year, it grew and quarter-on-quarter. So there's growth. It's just not the growth that, you know, we've been looking at over the last few years. And again, even slight growth tells you that we weren't overshipping, right?
Right.
And, you know, people talk about the LTSAs. You know, we have engagements with customers. If they have a weak softness in their market and they have an LTSA, we're gonna get the call six months in advance. And that call basically goes along: "Hey, our run rate is not where we thought it would be in this certain area. We're gonna have potentially some inventory. What are the options?" If I can ship that to somebody else that I've been undershipping to, we're gonna redirect it. So somebody gets more supply to meet their demand, and somebody's not gonna get oversupply that's gonna sit in inventory. So that LTSA and the conversations we're having with the customer to have a win-win, although we may take some down and amend it, saying, "Yep, no problem," net-net, it's a win-win.
That's exactly what the LTSAs have provided us. The structure we put in, given that it's a legally binding agreement, have forced that conversations for us to have a, to land in a much better spot than we would have otherwise been.
When you talk about the LTSAs, how exclusive are those to the silicon carbide side versus LTSA in a more general sense?
So when we started the LTSA journey, it was a lot of it was silicon carbide and image sensing, you know, one of the highest constrained technologies. And what customers quickly realized is, "Hey, when we have an LTSA, we actually can sleep better at night. We're getting what we need, when we need it from onsemi, and we don't have to worry about, you know, managing allocation." So as, you know, we went year, year in, customers came back and says, "Yep, we're now a year in. There's three more years or four more years. I wanna pile on another year." So can we have a five-year or 10-year rolling? "But I wanna add all of these things that we buy from onsemi that we didn't add it before." Although they're not constrained, they just want the whole BOM.
Like, they don't want a golden screw, phenom tt. So we added a lot. That's why, you know, in our commentary, we talk about some of the LTSAs. We have over 200 parts on them. And that is the value. It's not like the part—the product was constrained, it's just the value of the LTSA, and that's why even in a, I mentioned, even in a softer market, customers came back and wanting to add or extend their LTSAs when really they didn't have to. So for you guys.
Hassane.
Yeah, go ahead.
Let me help give you some numbers to answer that question, too. So we have $20 billion of lifetime LTSAs across the entire portfolio. Of that, $11 billion is silicon carbide. So that gives you kind of that breakdown between the two. And Hassane's exactly right. We've just been expanding on both of those, but we've seen customers coming in now. They started with silicon carbide, they're expanding that across the portfolio because they buy more than just one product from us. Of that, $6.4 billion will ship in the next 12 months.
Gotcha.
So that kind of gives you an indication of the coverage that we have.
And so in general, it sounds like your belief and the evidence so far, at least for On, is that, onsemi, sorry, I'm referring to the ticker. The rebranding thing still gets me. For onsemi, is that the LTSAs are not a reflection of cyclical shortages from a couple of years ago, supply chain disruption. It's a structural change in how you go to market.
That's right. And because, look, the focus for customers now is supply assurance and supply resilience. So when customers have seen that we're able to showcase resilience and assurance based on the LTSAs and, you know, the Fab-Right model that we have, where we are able to come to the customer and say, "Hey, you're buying from this manufacturing supply from us. We have another one that is independent." Customer go, "Great, now I can double down with you and have confidence in that longevity of the business. We wanna add that product or that technology to the LTSA.
Last LTSA question: Have you seen, well, what do you do if you've seen customers not want as much? I know you said, you know, you weren't gonna give them a hundred percent of what they wanted anyway, because you just couldn't. But to the extent demand weakens, how concrete are those enforced? Because you have a longer-term partnership with these companies.
Mm-hmm.
Jamming them with inventory today doesn't seem like, even though legally it sounds like you could, doesn't seem like it's necessarily the right thing to do.
That's right. Like I said, it starts with the phone call and, okay, to answer it at a high level, it really depends on the attitude on the other side of that phone call. We're here to solve the problem, right? Just like in prior softer market without the LTSA, you know, just look at the performance of ons emi. Margins were, you know, I guess, dropped heavily. Gross margin, profit margin, utilization had to be hard stop. You know, all of that stuff that makes the model unpredictable. That's not what we want. So we're aiming and we're striving for a very predictable business. So what does that mean? Before, backlog used to disappear, and you're left with the product that was gonna ship tomorrow, and now you can't ship 'cause backlog disappeared.
Well, that harms onsemi, and we're the only ones accountable. Basically, we're left holding the bag. So how do we deal with that? Because the customer is legally liable, like you said, they're going to place the call at the first sign of softness they have, because they have a small bag to carry also, not just onsemi, and that makes the partnership a win-win as far as trying to find a solution. If we don't have a solution, at least I can stop the new wafers until I flush the inventory, 'cause I'd rather stop wafers, and you saw that in the utilization in certain cases, use the WIP I have to ship to them, versus keep the wafers and now there is over inventory in the market, and that doesn't help anyone.
That's a win-win, for example, and the customer will say, "And I will add two years on top of the LTSA, because that's the run rate." That's a win-win I'll take anytime. Now, if I don't have another customer to give that capacity to, then we have to talk about, you know, is it a different cost structure now? Because, you know, lower volume, different impact. So all of these are, every customer has different constraints, and we are going to sit down and work with the customer strategic, 'cause all these customers, like you said, are strategic. That's why we have an LTSA with them to begin with. So we're gonna sit with the customer, and we're going to find a win-win.
The last macro question for you. You talked about, I think I said cautious, and you said cautiously optimistic at the beginning of the year, but you weren't baking in a big snapback. And at least in my opinion, that ended up being a very wise bet. To the extent your crystal ball was correct then, and you were cautiously optimistic, what is your crystal ball saying now for, you know, the next 12 months?
Crystal ball is cloudy. So what I will tell you is, what I said on the call is, we're, we're just planning on going sideways for a while. And, you know, from that perspective, I'll tell you, okay, if we're wrong and the market picks up, Hassane's gonna get a few more escalation calls. I'll deal with it, rather than plan for it and have inventory and all the stuff that, that you end up paying for in the long term. So that's our posture moving forward, is we're gonna look. We're looking for signs. If that's not the case, but if things go sideways, great. If things actually are better than what we think, look at it this way: We'll take up utilization. That's tailwind for our margin. That's tailwind for revenue.
Everything that we are being cautious about turns into a net favorable. So I'd rather have that than plan for it getting better, then everything you do is actually a headwind. I'd rather take the tailwind with the plan rather than have to drive through headwinds. Because again, you have to think about where we are. Predictability of our financial model is really what we're striving for. We set a new floor for our margin. You know, we talked about it many times. All of that is what onsemi is about today, and we're managing the company with that in mind.
Great. So why don't we pivot over to the silicon carbide side of things? It's a topic you guys may have been asked about once or twice. This last quarter, you guys hit an incredibly impressive milestone, in my mind at least, with the gross margin. I think you said, for the operating margins in the high teens and the gross margin doubling quarter-over-quarter. What was the key point in execution to deliver those, and were you surprised at how quickly that happened?
The biggest thing is operational efficiencies. You know, we knew where the revenue was going to be. We knew the ramp was gonna be there. We had talked about that the business is operating well, but we never stopped working on operational efficiency, whether it's yield or output or throughput or cost and so on. The team, our worldwide team, and I say worldwide, is not a one group. You can think about it as business unit, manufacturing, back-end. They've done a tremendous job just putting a ton of focus on operational excellence. We have a plan. We measure ourselves against, our own plan, which is an aggressive plan, and they've beat that plan.
You know, we indicated it a little bit in the first quarter that we're kind of trending ahead of our plan, and then in Q2, it really continued, which makes it structural. You know, it wasn't like a one-quarter fluke thing. So structurally, that business is operating much better, and that's across the board, you know, from substrate growth and substrate output from our Hudson facility, all the way to wafering, EPI, device manufacturing in Bucheon, and then out to our customers. So that whole supply chain, you know, whether it's yields, whether it's output, whether it's throughput, whether it's cost, has really lifted that business. We knew we were gonna get there. We got there a few quarters early.
Is the future expansion running according to plans? I know we talked about the brownfield aspect of it, so I think, Thad, you and I talked about it, about being able to just kind of leverage up quicker and more efficiently on a ROI basis. How's that progressing?
Yeah, look, you know, we've been bringing capacity on. I think we're really happy where we are right now. As we think forward into 2024 and even 2025, we're bringing capacity on to support the growth for those years as well, because there's long lead times on some of these things. But to your point on the brownfield, you know, the brownfield investments is 40% more capital efficient than a greenfield, right? Breaking ground, building a site from the ground up. So because we had a long history of having manufacturing and being able to leverage that, you know, that's what really got us time to market. And we think about these brownfields as being, you know, two years faster time to market.
So if you think about us and as we're planning the silicon carbide ramp, our risk really was on the substrate side. That was the GTAT acquisition. We had to get that one ramped. The rest of it is once we got the substrates going, the rest of it is. I'll call it business as usual. I mean, there's a lot of engineering that has to happen in there, but it's something that we've been doing for years, you know, for decades, and we're able to leverage that. So now as we think about the expansion that we need for 2024 and 2025, it's just supplemental tools, right? It's more of the same. It's not like we're having to start from scratch again. So it's just further expansion.
It's mainly about executing to the plan, not proving that you can actually-
That's right. I mean, we've done it. Now it's just multiplying.
Right. If I go back to the margin question, there's a secondary part of that, getting to the high teens operating margin, and I believe you've talked about having a corporate average gross margins, is it exiting this year?
That's right.
What's the operating margin that can be delivered in this business?
Yeah, look, there's a lot of leverage in this business. If you think about these wins with these customers, they're billion-dollar, multi-billion-dollar wins, right? So if you think about your R&D spend, your SG&A spend, you're not spending dollar for dollar to get that, right? So there's a lot of leverage. So when we think about longer term, we've, our long-term model is 53% gross margin. We've said silicon carbide at scale will be at or above that level. Operating margin target for the corporation is 40%. We believe for silicon carbide, it'll be north of that as well, just because of the scale of the business. You know, again, you're not adding dollar for dollar for every dollar revenue.
Yeah, one thing I would say just for the audience here, when we talk about high teens operating margin, this is a fully loaded business. You know, it's not just what the business, meaning it's got G&A, stock-based comp, you know, our time, portion of that. So it's a fully loaded P&L with all of the start-up costs that are in it. That's what makes the performance. So if this were to be, you know, a standalone company, well, you put the multiple on it.
Right. So I think I know the answer to this, but when the bearish people talk about some sort of eventual commoditization of the silicon carbide side of things, obviously, that's not your view, given the margin targets that you just talked about, Thad, but, what's your pushback on that? Is it the kind of end-to-end approach that On takes, or is there something different at each node of that supply chain that you or product chain that you bring?
Yeah, it's. Look, what makes some a technology commodity or not is the value that it provides, and the value that a technology provides lies in the roadmap. It doesn't matter what technology it is, the sexiest technology, forget about silicon carbide for a second. The best technology, if you stay stagnant, you will be a commodity because the number two and three and four will catch up to you. There is no different than silicon carbide. So why do I have a different, different view of this commoditization of it? Is because I look at it from a technology perspective. Most people look at it from a supply perspective.
You know, when you're talking about silicon carbide, if you're not able, with the technology, to provide 5%-10% efficiency, which translates to range or translates to battery, it doesn't matter how much supply you have. You can have all the supply in the world, nobody is going to buy your product. You know, and let's take internal combustion engine today. I can make all three-cylinder, you know, engines that I want for very cheap, but if the world's moving to four-cylinder, it doesn't matter. So it is upon us to keep investing in the right technologies. And when I say technology, I don't mean the device, you know, the silicon carbide side. I mean, device and packaging. That's why we're winning today. That's why we will continue to win, and we will keep pushing that technology.
You know, in our Analyst Day, Simon talked about the roadmap on both packaging and devices. That's what we have to keep doing. I think the misconception, even in the chatter today, people talk about substrates being available. That's not a competitive threat for our business. We don't ship substrates in the market. If substrates become available, good quality and a cost that maybe is cheaper than I can do it inside over time, because today it's not, okay, great. That's an opportunity for us, not a threat. So these are kind of the things. So you have to. It's easy to make, you know, statements of or assert a statement of fact, but you have to break it down into what is the driver for each of these.
Every single one is either our execution or an opportunity. So I feel very comfortable with where we are with the business, and look, customers are voting with their awards, and we have the awards.
And part of it, that running fast in your customer base, one of those steps would be, I assume, going to the larger wafer size, the 200-mm size. Talk about the importance of that, the timing of that, and in general, where you believe you guys are positioned in that transition.
Yeah. So we're already making eight-inch wafers on silicon carbide. So the transition is, you know, going from six to eight. Obviously, we talked about our six-inch performing much better than we thought, and really, our six-inch is performing much better than anybody out in the market at six-inch today, financially. So the transition to eight is purely for capacity. You know, we're not solving a yield problem in six that we're hoping to solve it in eight, for example. So we have a solid business on six. We are running eight to build a baseline, so we are able to ramp very quickly when the time comes. So what is the time? We have said we're qualifying eight-inch in 2024, and we will start to ramp in 2025.
If you look at our CapEx model, it's about the same time our CapEx will start tapering down. Because we look at eight-inch as a capacity enhancement, not to solve a specific problem, because otherwise, like I said, financially, why would you, given that the performance is so good in six? But we need the capacity cheaper than putting CapEx. So, you know, Thad and, and Al, as they said, the next few years, we'll have a high-teen CapEx, high-teen% of revenue, and it's gonna then go down and land about 11%. And it's about the same time where we start doing a conversion, which is a much cheaper CapEx from six to eight. So we get the capacity increase with lower CapEx. So that has always been our plan, that's our strategy, and we're executing to that.
So I think that's enough on the silicon carbide side for now. I know it's the popular topic of the day. Why don't we talk about the image sensor side of things? You know, silicon carbide is a nice read, obviously, to the EV side and some of the energy infrastructure, but for the ADAS side of things, image sensors are important. Talk about your commitment to that. There was a conspiracy theory that when you guys came in and you would be looking to enter things and exit things, that that one stood out as being different and something you could carve off. Obviously, you haven't done anything yet, and you're probably not gonna tell me now if you would. But just talk about where you believe your position in the image sensor side of things today.
Let me first deal with the FUD that was out there, or the conspiracy theories. Where we are different doesn't bother me, but I need high-performing businesses. Think about where that business is now. From where it was two years ago, that business is a high-performing business. From a margin, from operating income, from growth, it's a high-performing business, and I like high-performing businesses, especially when you have leadership position in the market. So that, back then, it was something that had to get fixed because we're not going to have a business that is really dilutive to the value of the company. Every business we have in the company has to create shareholder value for it to be part of the company.
So we are now here with a high-performing business, very good market share, very good market positioning. Now it's about investing in that business, and the investment happens along the technology domain. Higher pixels, you know, with the eight megapixel, more on solutions specifically for automotive. And when I say specifically for automotive and industrial, over the last two years, we have exited a lot of the non-auto, non-industrial image sensor by default, because we didn't have enough capacity. So we prioritize auto industrial, and right now, over 90% of that business is auto and industrial. So it fits perfectly with our, with our, you know, go-to-market. So that's where that business is. We're very happy with the business. Right now, we are in execute, execute, execute on the roadmap.
How is the supply side of that equation? Obviously, it has to be fixed for it to be growing now as fast as it is, but, are you diversifying the supply base for that?
So we are, but first on the growth side of it, you know, the shift going to from the non-auto industrial to auto industrial, of course, released capacity that we can now grow into auto and industrial. That's one which is typically a higher ASP because of the product types. So that creates the growth, but also the conversion from a 28 megapixel camera comes with a higher ASP. So you're gonna see a top-line growth, even if the units are not, because there's conversions of higher resolution.
But as far as diversification, back to the, you know, customers wanting supply assurance and supply resilience, I'm very proud of the team for having taped out our new image sensor out of our own fab in here in North America, in East Fishkill, which puts actually that fab as being the only imaging fab in North America that exists in North America. That's a very big milestone. We've already sampled it to our key partners, you know, the, the platform makers. So that's a product that's already in the hand, so that fits with our diversification of supply.
So again, if anybody has any questions, just raise your hand. But since you mentioned East Fishkill, I'll ask a couple questions that, you know, obviously you can answer, but might be a little bit more targeted towards Thad. The silicon carbide side of things, the margins have upside surprise in the last couple of quarters. East Fishkill has been the other side of the equation. What went wrong in the East Fishkill side, and what are you guys doing to fix it?
Yeah. So, look, we, we closed that transaction. We bought East Fishkill from GlobalFoundries, closed it on December thirty-first. Took operational control and found out real quick that the cost structure was not what we expected it to be walking in there. We have a large manufacturing network and a fab network, and we know exactly what costs should be. So when you, when you quantify this, it's about 250 basis points dilutive to the, to the corporate margin right now. So if you look at what we did last quarter, we absorbed that because silicon carbide performed so well. But the fact is, it's gonna be dilutive. We believe by the end of 2024, we'll get that under control, and it'll be back to, back to where we need it to get to.
It's a lot of blocking and tackling. You know, it's, it's cycle times, it's material cost, it's, it's things that we know how to do. It's just a matter of it takes time. Now, that fab is fully loaded today, so you got to be really careful as you go in and start tweaking and turning knobs in a fab that's fully loaded. You know, you can't break it at the same time. So that's why it's just going to take time for us to go restructure those contracts, change it around, get the flows right, get the cycle time moving at the right pace, and then as we move more and more products in there and GlobalFoundries exits, it, you know, it, it helps with our margins overall. So it's, it's just a matter of time.
It's going to take a little bit longer than we expected.
So it's not just that the market's been weak and it's therefore an underutilized asset?
No, no, it has nothing to do with the market. It's actually just the cost structure in the fab.
Is there a transition where the GlobalFoundries, whatever portion of that capacity they're using, contractually falls off? I assume that would be accretive to the gross margin as well.
Yeah. So today, we've got about 40% of the capacity, they've got 60. So we're doing foundry services for them. Just as before, when they owned it, they were doing foundry services for us. Contractually, they step down over three years, we step up over three years. So by the end of 2025, they're out. We've got full capacity and full capability in there. So we've been qualifying products in there already for two plus years, getting this ready for this transition. As Hassane said, we've already qualified the first sensing product in there. So it's a matter of as they wind down, there's—it's nice and orderly, they wind down, we wind up. Right now, there's nothing market-driven causing this. This is purely just a cost structure inside the four walls of the fab that we've just got to go fix.
Right. But as you, as you ramp up and they ramp down, that in and of itself would be accretive, correct?
Yeah. Now, it depends where those products come from. If we're moving something from the outside inside, it's accretive margins, right? It depends where it's coming from inside our network. If it is in a fab that's fully depreciated, it may be neutral in cost, but what it does for us is it gives us capacity. So in Korea, we've been moving our IGBTs out of there into East Fishkill to create capacity for silicon carbide. So the best thing about this is it's giving us the flexibility to start what we call the fab, right? Moving the products around to get the right cost structure and have the right capacity. That's the number one benefit of this fab for us longer term.
But to your point, in the short, short term, the foundry business is kind of low single-digit margin.
Right.
So that revenue, when it winds down.
Yeah
F rom a mix perspective, it's favorable to our margin.
Right, you remove the negative.
Exactly.
Right.
Exactly.
So we only have a couple of minutes left, so why don't we just wrap up with kind of a higher level topic? That, you know, it's been an incredible transformation of ON since you guys took over. Where do you think we are in that transformation? I know there's some exits that are left, and if you don't exit it by the end of this year, maybe we don't even talk about that phrase anymore. But where are we in the transformation? Are you almost done with the exits, and after that's done and you're clean, what's the next step for investors to look forward to?
Well, look, I'll, I'll start with the exits. You know, we've got about another $250 million that we think will exit this year. To date, since we started on this journey of exits, it's been about $400 million that we've exited. So, with the market such that it is, with some softness and supply coming online, you know, we, we think we're gonna. We think this business will go away. Now, we've overcalled this for two years consistently, you know, thinking that we were gonna lose this faster than we did, and we've always said the faster we lost it, the better off we'd be. The fact is, we've raised pricing, and customers are staying with us. Today, what's left of that $250 million is, you know, calling margins in the mid-40%. It's not bad business any longer.
So if at the end of the year that all hasn't gone away, that's just gonna be business as usual, usual for us. We'll just manage it. If we don't need that capacity for something else, we'll just keep it and run it. It's fine at that, at that level. That's, you know, that's how we run all of our businesses. You want to comment about where we are?
Yeah. At a high level, after the last Analyst Day, when you talk about a transformation, work never stops. We're always gonna do better and higher and more efficient. But if you think about the structural, where we lifted, you know, ON and put it on ons emi, that lift has been done. The benefit of it has not been all captured. So when we talk about transformation, you know, from a shareholder, investor, or potential investor perspective, you know, the conversation is: Well, where do we go from here? What—How much value there is?
And if you just look at the next five years from a just an operating income perspective, as we scale, you know, the silicon carbide, as we grow the new analog revenue, as we get the benefit of the Fab-Liter strategy that we've had with $160 million, there's margin expansion, there's a top line at more favorable margin, and there's a fall-through of in the model. So all of these are yet to come, but the heavy lift has done, and we've proven the structural improvement in the company as we're navigating through that downturn better than we've ever done in the history of the company. So all of that is what's yet to look forward to. And again, the beauty of it is all in our execution.
We've proven that we're resilient, resilient to the extent we can with the market or more resilient than we have ever been. So what leaves is now execute to that strategy so we can deliver to it. And that, I'm more comfortable and confident in our execution because we've proven it in good and hard times.
Well, I think that's a perfect way to wrap it up. We're out of time. So Hassane and Thad, thank you very much.
Thank you.