Shares of ON Semiconductor, which trades as onsemi, tumbled about 22% on June 26 to close near $90.65, Yahoo Finance reported — the stock's worst single day since 2020, according to CNBC. The trigger was the company's own announcement that it would buy chipmaker Synaptics in a $7 billion all-stock deal.
The deal
Under the agreement, each Synaptics share converts into 1.350 onsemi shares, a roughly 19% premium to both stocks' average price over the prior 10 trading days. Because it is structured entirely in stock rather than cash, onsemi takes on no new debt — but existing shareholders pay a different price: Synaptics investors will end up owning about 12% of the combined company, diluting current onsemi holders' stake. The company projects $200 million in annual cost savings within 18 months of closing, which is expected in mid-2027 pending a Synaptics shareholder vote and regulatory approval.
What onsemi is buying
Synaptics is best known for the touchpad and touch-screen controllers in laptops and phones, but it has been repositioning around edge AI — running artificial-intelligence models directly on a device rather than in a distant data center. Its products include processors and connectivity chips for that purpose.
Onsemi frames the deal around "physical AI," its term for intelligence built into machines that must sense and react to the real world in real time — think a car deciding when to brake, or an industrial robot adjusting to its surroundings. "This shift towards Physical AI will require Power, Sense, Connected Compute and Control to work together seamlessly," chief executive Hassane El-Khoury said in the announcement, casting Synaptics as the "connected compute" piece onsemi lacks. The company says the combination widens its addressable market to $243 billion by 2030, about $30 billion more than on its own.
Why investors balked
The market's verdict was blunt. Several concerns overlapped, Yahoo Finance noted: the all-stock structure means existing shareholders, not cash or debt, absorb the cost through dilution; Synaptics carries exposure to consumer electronics and handsets, markets onsemi had largely steered clear of, raising questions about strategic fit; and management offered $200 million in cost synergies but little detail on how the two firms' revenues would grow together.
The skepticism showed up in analyst calls too. TD Cowen's Joshua Buchalter downgraded onsemi to "hold" with a $110 price target, writing that the deal "clouds" the company's growth story and dilutes its appeal as a focused play on automotive electrification and data-center power, according to Investing.com.
The backdrop
The reaction did not come in a vacuum. Chip stocks had already softened in the prior days, pressured by leverage-driven selling in South Korean semiconductor names and by markets repricing the path of U.S. interest rates — leaving the sector vulnerable to any negative catalyst, Yahoo Finance reported. El-Khoury, for his part, defended the transaction in a CNBC appearance as the share price slid, arguing it positions onsemi for a market shifting toward AI embedded in physical machines.
If it closes, the deal would broaden onsemi from a relatively focused maker of automotive and industrial power chips into a wider platform spanning power, sensing, connectivity and on-device AI. Whether that breadth is a strength or a distraction is exactly the argument now playing out in its share price.
