MANHASSET, N.Y. Semiconductor supplier ON Semiconductor is tracking toward the midpoint of its guidance range for sales of $405 to $415 million in the third quarter ended September, according to a report by securities firm Wedbush Morgan Securities.
The report said ON expects third-quarter gross margin will drop slightly to 38 percent as ON ramps up lower margin foundry business at the Gresham, Ore., fab purchased from LSI Logic Corp. in April. The gross margin target exceeds the 36 percent projected by Wedbush.>
Wedbush expects the fab to help ON accelerate its new product development roadmap using advanced 0.18-micron process technology. The acquisition is expected to be accretive to ON's 2007 earnings.
However, Wedbush added long-term gross margin could be constrained as foundry service revenue increases, with little impact on earnings per share.
On the positive side, ON will see flat third-quarter pricing, stable leadtimes, and modest inventory levels, according to Wedbush.