Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
ON Semiconductor Corp., ROIC calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,073,654) | 1,991,931) | 1,214,151) | 262,790) | 340,562) | |
| Invested capital2 | 10,925,400) | 9,371,400) | 7,560,500) | 6,889,500) | 6,857,500) | |
| Performance Ratio | ||||||
| ROIC3 | 18.98% | 21.26% | 16.06% | 3.81% | 4.97% | |
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Advanced Micro Devices Inc. | -0.35% | -0.24% | 56.77% | — | — | |
| Analog Devices Inc. | 7.11% | 5.76% | 2.37% | 6.95% | — | |
| Applied Materials Inc. | 36.75% | 46.34% | 41.96% | 29.68% | — | |
| Broadcom Inc. | 23.04% | 20.75% | 10.98% | 4.78% | — | |
| Intel Corp. | -1.60% | 4.14% | 22.03% | — | — | |
| KLA Corp. | 40.63% | 42.51% | 31.64% | — | — | |
| Lam Research Corp. | 27.10% | 41.68% | 37.13% | — | — | |
| Marvell Technology Inc. | 0.17% | -1.91% | -2.75% | — | — | |
| Micron Technology Inc. | -11.18% | 17.39% | 13.01% | — | — | |
| NVIDIA Corp. | 10.91% | 53.12% | 33.44% | — | — | |
| Qualcomm Inc. | 18.69% | 45.12% | 42.56% | 27.48% | — | |
| Texas Instruments Inc. | 28.83% | 49.74% | 48.28% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2023 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 2,073,654 ÷ 10,925,400 = 18.98%
4 Click competitor name to see calculations.
Between 2019 and 2023, a significant transformation in capital efficiency and operating profitability is observed. The period is characterized by a sharp escalation in net operating profit after taxes (NOPAT) that substantially outpaced the growth of the invested capital base, leading to a dramatic increase in the return on invested capital (ROIC) before a slight normalization in the final year.
- Net Operating Profit After Taxes (NOPAT) Trends
- Operating profitability experienced a period of volatility followed by rapid expansion. After a decline from US$ 340.56 million in 2019 to US$ 262.79 million in 2020, NOPAT surged to US$ 1.21 billion in 2021 and reached US$ 2.07 billion by 2023. This growth trajectory indicates a substantial increase in the company's ability to generate cash flow from its core operations.
- Invested Capital Growth
- The invested capital base grew steadily over the five-year period, rising from US$ 6.86 billion in 2019 to US$ 10.93 billion in 2023. The most pronounced increases occurred between 2021 and 2023, reflecting a strategic expansion of the company's asset base to support operational growth.
- Return on Invested Capital (ROIC) Performance
- ROIC demonstrated a sharp upward trend, recovering from a low of 3.81% in 2020 to a peak of 21.26% in 2022. The rapid climb during this window reflects high efficiency in converting newly deployed capital into operating profit. The slight decrease to 18.98% in 2023 suggests that the growth in invested capital (which increased by approximately 16.5% year-over-year) exceeded the growth rate of NOPAT (which increased by approximately 4% year-over-year) during that specific interval.
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Decomposition of ROIC
ON Semiconductor Corp., decomposition of ROIC
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
Between 2019 and 2023, Return on Invested Capital (ROIC) exhibited a substantial upward trajectory, rising from 4.97% to 18.98%. The most significant expansion occurred between 2020 and 2022, where ROIC grew from a low of 3.81% to a peak of 21.26%, before experiencing a slight moderation in 2023.
- Operating Profit Margin (OPM)
- The primary driver of the ROIC increase is the dramatic expansion of the operating profit margin. After a slight dip in 2020 to 6.72%, the margin grew aggressively, reaching 19.27% in 2021 and continuing to climb to 30.82% by the end of 2023. This indicates a significant improvement in operational efficiency and pricing power over the five-year period.
- Turnover of Capital (TO)
- Capital turnover remained relatively stable, fluctuating within a narrow range between 0.76 and 0.89. While efficiency peaked during 2021 and 2022 at 0.89, a decline to 0.76 in 2023 suggests that the growth in invested capital may be outpacing revenue growth or that asset utilization has decreased.
- Effective Cash Tax Rate (1 – CTR)
- The tax multiplier demonstrated volatility without serving as a primary catalyst for the overall ROIC trend. The value peaked at 93.47% in 2021 before stabilizing around 81.5% in 2023. While these fluctuations influenced the final return, the impact was secondary to the operational gains.
The decomposition reveals that the overall improvement in ROIC is almost exclusively attributable to the surge in operating profit margins rather than increases in asset turnover or tax optimizations. The moderation in ROIC from 21.26% in 2022 to 18.98% in 2023 is primarily explained by the reduction in capital turnover, as the operating profit margin continued to improve during that same interval.
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Operating Profit Margin (OPM)
ON Semiconductor Corp., OPM calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,073,654) | 1,991,931) | 1,214,151) | 262,790) | 340,562) | |
| Add: Cash operating taxes2 | 470,018) | 457,073) | 84,769) | 90,557) | 79,994) | |
| Net operating profit before taxes (NOPBT) | 2,543,672) | 2,449,003) | 1,298,921) | 353,347) | 420,556) | |
| Revenue | 8,253,000) | 8,326,200) | 6,739,800) | 5,255,000) | 5,517,900) | |
| Profitability Ratio | ||||||
| OPM3 | 30.82% | 29.41% | 19.27% | 6.72% | 7.62% | |
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Advanced Micro Devices Inc. | 2.02% | 5.31% | 22.70% | — | — | |
| Analog Devices Inc. | 32.00% | 27.59% | 20.52% | 26.98% | — | |
| Applied Materials Inc. | 29.22% | 30.32% | 30.54% | 25.67% | — | |
| Broadcom Inc. | 45.19% | 42.94% | 30.96% | 17.06% | — | |
| Intel Corp. | -0.86% | 13.58% | 28.05% | — | — | |
| KLA Corp. | 39.78% | 41.73% | 36.39% | — | — | |
| Lam Research Corp. | 28.38% | 35.59% | 34.25% | — | — | |
| Marvell Technology Inc. | 4.55% | -7.16% | -8.08% | — | — | |
| Micron Technology Inc. | -36.91% | 31.43% | 23.10% | — | — | |
| NVIDIA Corp. | 15.97% | 37.99% | 28.45% | — | — | |
| Qualcomm Inc. | 21.48% | 35.06% | 30.10% | 24.17% | — | |
| Texas Instruments Inc. | 44.51% | 51.22% | 49.60% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2023 Calculation
OPM = 100 × NOPBT ÷ Revenue
= 100 × 2,543,672 ÷ 8,253,000 = 30.82%
4 Click competitor name to see calculations.
A significant expansion in operational efficiency and profitability is observed between 2019 and 2023. While revenue growth remained steady, the acceleration in net operating profit before taxes indicates a substantial improvement in the company's ability to convert sales into operating income.
- Revenue Trends
- Revenue experienced a slight contraction in 2020, decreasing to 5.255 billion US dollars from 5.518 billion US dollars in 2019. This was followed by a period of robust growth, peaking at 8.326 billion US dollars in 2022, before stabilizing at 8.253 billion US dollars in 2023.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT exhibited an exponential growth trajectory starting in 2021. After a low of 353.3 million US dollars in 2020, operating profit surged to 1.299 billion US dollars in 2021 and reached 2.544 billion US dollars by 2023. This represents a total increase of approximately 505% over the five-year period.
- Operating Profit Margin (OPM) Expansion
- The operating profit margin underwent a dramatic transformation, moving from single-digit margins of 7.62% in 2019 and 6.72% in 2020 to 30.82% by 2023. The most aggressive margin expansion occurred between 2020 and 2022, where the OPM increased by more than 22 percentage points.
The divergence between revenue and operating profit in 2023 is particularly noteworthy. Despite a marginal decline in total revenue, the NOPBT continued to climb, resulting in the highest recorded operating profit margin of 30.82%. This suggests an optimization of the cost structure or a strategic shift toward higher-margin product mixes.
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Turnover of Capital (TO)
ON Semiconductor Corp., TO calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Revenue | 8,253,000) | 8,326,200) | 6,739,800) | 5,255,000) | 5,517,900) | |
| Invested capital1 | 10,925,400) | 9,371,400) | 7,560,500) | 6,889,500) | 6,857,500) | |
| Efficiency Ratio | ||||||
| TO2 | 0.76 | 0.89 | 0.89 | 0.76 | 0.80 | |
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Advanced Micro Devices Inc. | 0.39 | 0.40 | 2.65 | — | — | |
| Analog Devices Inc. | 0.28 | 0.27 | 0.16 | 0.31 | — | |
| Applied Materials Inc. | 1.49 | 1.73 | 1.57 | 1.31 | — | |
| Broadcom Inc. | 0.57 | 0.53 | 0.42 | 0.36 | — | |
| Intel Corp. | 0.59 | 0.71 | 0.89 | — | — | |
| KLA Corp. | 1.26 | 1.18 | 1.01 | — | — | |
| Lam Research Corp. | 1.14 | 1.35 | 1.24 | — | — | |
| Marvell Technology Inc. | 0.30 | 0.22 | 0.33 | — | — | |
| Micron Technology Inc. | 0.29 | 0.59 | 0.61 | — | — | |
| NVIDIA Corp. | 1.26 | 1.49 | 1.28 | — | — | |
| Qualcomm Inc. | 1.14 | 1.50 | 1.66 | 1.33 | — | |
| Texas Instruments Inc. | 0.78 | 1.14 | 1.12 | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 Invested capital. See details »
2 2023 Calculation
TO = Revenue ÷ Invested capital
= 8,253,000 ÷ 10,925,400 = 0.76
3 Click competitor name to see calculations.
The turnover of capital exhibits a cyclical pattern over the five-year period, characterized by an initial decline, a recovery peak, and a subsequent contraction. While revenue experienced overall growth between 2019 and 2023, the rate of investment in capital outpaced revenue generation in the most recent fiscal year.
- Revenue Dynamics
- Revenue increased from US$ 5,517.9 million in 2019 to a peak of US$ 8,326.2 million in 2022, before experiencing a slight contraction to US$ 8,253.0 million in 2023.
- Invested Capital Expansion
- A consistent upward trajectory is observed in invested capital, which rose from US$ 6,857.5 million in 2019 to US$ 10,925.4 million by the end of 2023. This represents a significant expansion of the asset base to support operations.
- Turnover of Capital Efficiency
- The capital turnover ratio improved from 0.76 in 2020 to a peak of 0.89 in 2021 and 2022, indicating a period of increased efficiency in generating sales per unit of invested capital. However, the ratio returned to 0.76 in 2023, reflecting a disconnect between the continued growth of invested capital and the stagnation of revenue.
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Effective Cash Tax Rate (CTR)
ON Semiconductor Corp., CTR calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | 2,073,654) | 1,991,931) | 1,214,151) | 262,790) | 340,562) | |
| Add: Cash operating taxes2 | 470,018) | 457,073) | 84,769) | 90,557) | 79,994) | |
| Net operating profit before taxes (NOPBT) | 2,543,672) | 2,449,003) | 1,298,921) | 353,347) | 420,556) | |
| Tax Rate | ||||||
| CTR3 | 18.48% | 18.66% | 6.53% | 25.63% | 19.02% | |
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Advanced Micro Devices Inc. | 143.92% | 111.01% | 5.73% | — | — | |
| Analog Devices Inc. | 20.23% | 21.73% | 25.70% | 16.31% | — | |
| Applied Materials Inc. | 15.68% | 11.76% | 12.33% | 12.01% | — | |
| Broadcom Inc. | 10.78% | 9.59% | 16.50% | 22.68% | — | |
| Intel Corp. | — | 57.13% | 12.07% | — | — | |
| KLA Corp. | 18.86% | 13.88% | 14.30% | — | — | |
| Lam Research Corp. | 16.15% | 13.55% | 12.57% | — | — | |
| Marvell Technology Inc. | 87.58% | — | — | — | — | |
| Micron Technology Inc. | — | 6.35% | 6.93% | — | — | |
| NVIDIA Corp. | 45.94% | 6.28% | 8.10% | — | — | |
| Qualcomm Inc. | 23.51% | 14.27% | 14.84% | 14.19% | — | |
| Texas Instruments Inc. | 16.49% | 14.83% | 12.93% | — | — | |
Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2023 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 470,018 ÷ 2,543,672 = 18.48%
4 Click competitor name to see calculations.
Analysis of the period between 2019 and 2023 reveals a significant expansion in operational profitability accompanied by non-linear fluctuations in cash tax expenditures. While net operating profit before taxes experienced substantial growth, the effective cash tax rate demonstrated a period of volatility before reaching a state of relative stabilization.
- Operational Profitability and Tax Expenditure
- Net operating profit before taxes showed a dramatic upward trajectory, increasing from 420.6 million USD in 2019 to 2.54 billion USD by 2023. This growth was most pronounced between 2020 and 2022. Cash operating taxes followed a different pattern, remaining below 100 million USD through 2021 before surging to 457.1 million USD in 2022 and 470.0 million USD in 2023.
- Effective Cash Tax Rate Volatility
- The effective cash tax rate exhibited significant variance, particularly between 2020 and 2022. After reaching 25.63% in 2020, the rate plummeted to a period low of 6.53% in 2021. This sharp decline occurred despite a significant increase in net operating profit before taxes during the same period, indicating a decoupling of profits and cash tax payments, likely due to the application of tax credits or deferred tax assets.
- Tax Rate Stabilization
- A trend toward normalization is observed in the final two years of the analysis. The effective cash tax rate rose from its 2021 low to 18.66% in 2022 and remained nearly constant at 18.48% in 2023. This indicates that as the company reached a new plateau of operational profitability, the cash tax burden stabilized at approximately 18.5% of net operating profit before taxes.
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