You should read the following discussion in conjunction with our audited historical consolidated financial statements, which are included elsewhere in this Form 10-K. Management's Discussion and Analysis of Financial Condition and Results of Operations contain statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties, and other factors. Actual results could differ materially because of the factors discussed in Part 1, Item 1A "Risk Factors" included elsewhere in this Form 10-K.

Executive Overview

This executive overview presents summary information regarding our industry, markets, business and operating trends only. For further information relating to the information summarized herein, see Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in its entirety.

Industry Overview

According to WSTS (an industry research firm), worldwide semiconductor industry sales were $291.6 billion in 2012, a decrease of approximately 2.6% from $299.5 billion in 2011. We participate in unit and revenue surveys and use data summarized by WSTS to evaluate overall semiconductor market trends and also to track our progress against the market in the areas we provide semiconductor components. The following table sets forth total worldwide semiconductor industry revenues and revenues in our serviceable addressable market since 2008:

                               Worldwide                                 Serviceable
                             Semiconductor        Percentage             Addressable           Percentage
Year Ended December 31,   Industry Sales (1)        Change           Market Sales (1) (2)        Change
                             (in billions)                              (in billions)
2012                      $             291.6            (2.6 )%    $                103.7            (3.4 )%
2011                      $             299.5             0.4 %     $                107.4            (2.5 )%
2010                      $             298.3            31.8 %     $                110.2            28.7 %
2009                      $             226.3            (9.0 )%    $                 85.6            27.6 %
2008                      $             248.6            (2.7 )%    $                 67.1            10.4 %

(1) Based on shipment information published by WSTS. WSTS collects this information based on product shipments, which differs from how we recognize revenue on shipments to certain distributors as described in "Significant Accounting Policies-Revenue Recognition" in the notes to our audited consolidated financial statements contained elsewhere in this report. We believe the data provided by WSTS is reliable, but we have not independently verified it. WSTS periodically revises its information. We assume no obligation to update such information.

(2) Our Serviceable Addressable Market ("SAM") comprises the following specific WSTS product categories: (a) discrete products (all discrete semiconductors other than sensors, microwave power transistors/modules, microwave diodes, and microwave transistors, power modules, logic and optoelectronics);
(b) standard analog products (amplifiers, VREGs and references, comparators, ASSP consumer, ASSP computer, ASSP automotive and ASSP industrial and others); (c) standard logic products (general purpose logic); (d) Standard Product logic (consumer other, computer other peripherals, wired communications, automotive and industrial); (e) CMOS image sensors;
(f) memory; (g) microcontrollers; and (h) motor control modules. Our SAM is derived using the most recent information available at the time of the filing of each respective period's annual report and is revised in subsequent periods to reflect final results.

Worldwide semiconductor industry sales declined 2.7% in 2008, declined 9.0% in 2009, grew 31.8% in 2010, grew 0.4% in 2011 and declined 2.6% in 2012, following a pattern associated with the financial crisis, subsequent recovery and persistent economic uncertainty. The decrease of 2.6% from 2011 to 2012 is related to global macroeconomic conditions within the semiconductor industry affecting sales in all geographic regions. Sales in our SAM grew in 2008, reflecting the expanded markets we now serve with the acquisitions of AMIS and Catalyst that exceeded the impact of any price declines. Sales in our SAM increased to $85.6 billion in 2009, to $110.2 billion in 2010, decreased to $107.4 billion in 2011, and decreased to $103.7 billion in 2012. The decrease of approximately 3.4% from $107.4 billion in 2011 to $103.7 billion in 2012 is consistent with the trend in the worldwide semiconductor market. The most recently published estimates of WSTS project a compound annual growth rate in our SAM of approximately 4.1% for the next three years. These projections are not ours and may not be indicative of actual results.

Recent Results

Our total revenues for the year ended December 31, 2012 were $2,894.9 million, a decrease of approximately 15.9% from $3,442.3 million for the year ended December 31, 2011, the majority of which was due to lower revenues generated from our SANYO Semiconductor Products Group and a weakened demand environment associated with less favorable global economic conditions. During 2012, we reported a net loss of $90.6 million compared to net income of $11.6 million in 2011. Our gross margin increased by approximately 360 basis points to 32.9% in 2012 from 29.3% in 2011, primarily due to an absence of $138.7 million in expenses related to our SANYO Semiconductor Products Group that were recorded in 2011, which did not reoccur in 2012.

During 2012, we recognized $165.3 million in restructuring and asset impairment charges. The majority of our restructuring and cost saving initiatives were focused on our SANYO Semiconductor Products Group. The SANYO Semiconductor Products Group experienced revenue and financial performance declines greater than our expectations and the cyclical declines in our other operating segments. These declines were a result of a combination of factors which included the continued impact from the October 2011 Thailand flooding, which permanently damaged one of our SANYO Semiconductor Products Group's manufacturing locations, a softening of the Japanese consumer market, and, to a lesser extent, political tensions between Japan and China, which began to impact our revenue levels in the second half of 2012. During 2012, we completed a significant reduction in workforce in the SANYO Semiconductor Products Group to help partially offset these revenue declines and recorded $35.9 million of related net restructuring charges for this program. However, these revenue and performance declines continued into the second half of the year, which caused us to re-evaluate the long-term projections and related incremental costs expected to be incurred in order to achieve acceptable operating results for the SANYO Semiconductor Products Group. As a result of these collective factors, in the fourth quarter of 2012, we determined that it was necessary to evaluate the recoverability of the long-lived assets of the segment. This evaluation concluded that an impairment charge of $126.0 million was required to adjust the carrying value of the long-lived assets to their respective fair values. Additionally, in the first quarter of 2013 we initiated another voluntary retirement program for the SANYO Semiconductor Products Group to achieve further costs savings and align expenses to our expected revenue levels for the segment. For further information on the 2013 voluntary retirement program, see Note 20: "Subsequent Events" of the notes to the audited consolidated financial statements located elsewhere in this Form 10-K.

For further information on restructuring activity, including our other restructuring and cost savings programs initiated during 2012, see Note 6:
"Restructuring, Asset Impairments, and Other, net" of the notes to the audited consolidated financial statements located elsewhere in this report.

Outlook

ON Semiconductor Q1 2013 Outlook

Based upon product booking trends, backlog levels, and estimated turns levels, we estimate that our revenues will be approximately $645 million to $685 million in the first quarter of 2013. Backlog levels for the first quarter of 2013 represent approximately 80% to 85% of our anticipated first quarter 2013 revenues. We

estimate average selling prices for the first quarter of 2013 will be down approximately 2% compared to the fourth quarter of 2012. For the first quarter of 2013, we estimate that gross margin as a percentage of revenues will be approximately 30.5% to 32.5%.

Business Overview

We are driving innovation in energy efficient electronics. Our broad portfolio of power and signal management, logic, discrete and custom devices helps customers efficiently solve their design challenges in automotive, communications, computing, consumer, industrial, LED lighting, medical, military/aerospace and power applications. We design, manufacture and market an extensive portfolio of semiconductor components that addresses the design needs of sophisticated electronic systems and products. Our power management semiconductor components control, convert, protect and monitor the supply of power to the different elements within a wide variety of electronic devices. Our custom ASICs use analog, DSP, mixed-signal and advanced logic capabilities to act as the brain behind many of our automotive, medical, military, aerospace, consumer and industrial customers' unique products. Our data management semiconductor components provide high-performance clock management and data flow management for precision computing and communications systems. Our standard semiconductor components serve as "building block" components within virtually all types of electronic devices. These various products fall into the logic, analog and discrete categories used by WSTS.

Historically, the semiconductor industry has been highly cyclical. During a down cycle, unit demand and pricing have tended to fall in tandem, resulting in revenue declines. In response to such declines, manufacturers have shut down production capacity. When new applications or other factors have caused demand to strengthen, production volumes have historically stabilized and then grown again. As market unit demand reaches levels above capacity production capabilities, shortages begin to occur, which typically causes pricing power to swing back from customers to manufacturers, thus prompting further capacity expansion. Such expansion has typically resulted in overcapacity following a decrease in demand, which has triggered another similar cycle.

New Product Innovation

Our new product development efforts continue to be focused on building solutions in power management that appeal to customers in focused market segments and across multiple high growth applications. As always, it is our practice to regularly re-evaluate our research and development spending, to assess the deployment of resources and to review the funding of high growth technologies. We deploy people and capital with the goal of maximizing our investment in research and development in order to position ourselves for continued growth. As a result, we often invest opportunistically to refresh existing products in our commodity logic, analog, memory and discrete products. We invest in these initiatives when we believe there is a strong customer demand or opportunities to innovate our current portfolio in high growth markets and applications.

Business and Macroeconomic Environment Influence on Cost Savings and Restructuring Activities

The semiconductor industry has traditionally been highly cyclical and has often experienced economic contractions in connection with, or in anticipation of, declines in general economic conditions. We believe the business environment continues to experience significant economic uncertainty and volatility, which has contributed to the current market weakness in our industry. These factors combined with other events, including the impact of the March 2011 Japan earthquake and resulting tsunami, the October 2011 flooding in Thailand and the heightened political and economic tensions between Japan and China, have either impacted us directly or have affected our customers and suppliers, which in turn has affected our business, including sales, production capacity, and results of operations for both our SANYO Semiconductor Products Group and other reporting segments. Although we regard certain of these issues as temporary, our continuing outlook will ultimately affect our future emphasis on marketing to various industries, our future research and development efforts into new product lines and our segments in general.

Due to the highly competitive nature of the semiconductor industry, we continually evaluate our cost structure and, as necessary, implement profitability enhancement programs to improve our financial performance. In connection with these programs, we aim to rank, as compared to our primary competitors, among the lowest in terms of cost structure. Our programs include efforts to:

• increase our die manufacturing capacity in a cost-effective manner;

• further reduce the number of our product platforms and process flows;

• rationalize our manufacturing operations;

• relocate manufacturing operations or outsource to lower cost regions; and

• reduce selling and administrative expenses.

We have taken significant actions during 2012 to align our overall cost structure with our expected revenue levels. In addition to the actions executed in 2012, as revenue and operating results have declined more than anticipated, we intend to implement further cost reduction measures in 2013 related to our SANYO Semiconductor Products Group, including a voluntary retirement program for certain of our SANYO Semiconductor Products Group subsidiaries, which is expected to reduce the employment levels at these subsidiaries by approximately 500 to 600 employees. Furthermore, we are continuing to review our capital investments and other expenditures to align our spending and capacity with our current sales and manufacturing projections. See Note 6: "Restructuring, Asset Impairments, and Other, net" and Note 20: "Subsequent Events" of the notes to our audited consolidated financial statements included elsewhere in this report for further discussion of certain details relating to our recent cost saving actions.

Results of Operations

The following table summarizes certain information relating to our operating results that has been derived from our audited consolidated financial statements for the years ended December 31, 2012, 2011 and 2010 (in millions):

                                           Year ended December 31,                       Dollar Change
                                      2012           2011          2010         2011 to 2012        2010 to 2011
Revenues                            $ 2,894.9      $ 3,442.3     $ 2,313.4     $       (547.4 )    $      1,128.9
Cost of revenues                      1,943.0        2,433.5       1,357.4             (490.5 )           1,076.1

Gross profit                            951.9        1,008.8         956.0              (56.9 )              52.8
Operating expenses:
Research and development                367.5          362.5         248.0                5.0               114.5
Selling and marketing                   180.9          195.1         145.6              (14.2 )              49.5
General and administrative              160.6          192.4         129.9              (31.8 )              62.5
Amortization of
acquisition-related intangible
assets                                   44.4           42.7          31.7                1.7                11.0
Restructuring, asset impairments
and other, net                          165.3          102.7          10.5               62.6                92.2
Goodwill and intangible asset
impairment                               49.5             -           16.1               49.5               (16.1 )

Total operating expenses                968.2          895.4         581.8               72.8               313.6

Operating income (loss)                 (16.3 )        113.4         374.2             (129.7 )            (260.8 )

                                                  Year ended December 31,                  Dollar Change
                                                                                      2011 to        2010 to
                                             2012          2011          2010           2012           2011
Other income (expenses), net:
Interest expense                              (56.1 )       (68.9 )       (61.4 )         12.8           (7.5 )
Interest income                                 1.5           1.1           0.5            0.4            0.6
Other                                           5.8          (8.9 )        (6.9 )         14.7           (2.0 )
Loss on debt repurchase or exchange            (7.8 )       (23.2 )        (0.7 )         15.4          (22.5 )
Gain on SANYO Semiconductor acquisition          -           24.3            -           (24.3 )         24.3

Other income (expenses), net                  (56.6 )       (75.6 )       (68.5 )         19.0           (7.1 )

Income (loss) before income taxes             (72.9 )        37.8         305.7         (110.7 )       (267.9 )
Income tax provision                          (13.4 )       (22.9 )       (12.8 )          9.5          (10.1 )

Net income (loss)                             (86.3 )        14.9         292.9         (101.2 )       (278.0 )
Less: Net income attributable to
non-controlling interest                       (4.3 )        (3.3 )        (2.4 )         (1.0 )         (0.9 )

Net income (loss) attributable to ON
Semiconductor Corporation                   $ (90.6 )     $  11.6       $ 290.5       $ (102.2 )     $ (278.9 )

Revenues

Revenues were $2,894.9 million, $3,442.3 million and $2,313.4 million for 2012, 2011 and 2010, respectively. The decrease from 2011 to 2012 was most pronounced in our SANYO Semiconductor Products Group with our other operating segments experiencing revenue declines as a result of a weakened demand environment associated with less favorable global economic conditions, as previously discussed. Our SANYO Semiconductor Products Group was impacted by the continued effects of the October 2011 Thailand flood, a softening of the Japanese consumer market, and, to a lesser extent, political tensions between Japan and China which began to impact revenue levels in the second half of 2012.

For the year ended December 31, 2012, we experienced changes in volume and mix, which resulted in a decrease of approximately 11.2%, as well as a decline in average selling prices of approximately 4.7% as compared to 2011.

The increase in revenues from 2010 to 2011 was due to revenues generated from the 2011 acquisition of our SANYO Semiconductor Products Group combined with increases in revenue of $68.6 million from our Application Products Group and Standard Products Group, excluding the effects of certain acquisitions. Revenues from our Application Products Group and Standard Products Group improved due to a 6.2% increase from volume and changes in mix, which was partially offset by a 2.0% decrease in average selling prices.

We changed our organizational structure during the fourth quarter of 2012 and previously reported information has been recast to reflect our current organizational structure. See Note 17: "Segment Information" of the notes to our audited consolidated financial statements included elsewhere in this Form 10-K for a further discussion regarding our reportable segments. Revenues by reportable segment for each of the three years below, were as follows (dollars in millions):

                                Year Ended                                   Year Ended                                   Year Ended
                               December 31,           As a % of             December 31,           As a % of             December 31,           As a % of
                                   2012              Revenue  (1)               2011              Revenue  (1)               2010              Revenue  (1)
Application Products
Group                         $      1,019.2                  35.2 %       $      1,145.5                  33.3 %       $      1,053.2                  45.5 %
Standard Products Group              1,104.7                  38.2 %              1,236.5                  35.9 %              1,260.2                  54.5 %
SANYO Semiconductor
Products Group                         771.0                  26.6 %              1,060.3                  30.8 %                   -                     -

Total revenues                $      2,894.9                               $      3,442.3                               $      2,313.4

(1) Certain of the amounts may not total due to rounding of individual amounts.

Revenues from the Application Products Group decreased by $126.3 million or approximately 11% from 2011 to 2012 and increased from 2010 to 2011 by $92.3 million or approximately 9%. The 2012 decrease in revenue can be attributed to a decrease in revenue from ASIC products of $70.9 million or approximately 11%, a decrease in revenue from analog products of $20.3 million or approximately 5% and a decrease in foundry services revenue of $13.4 million or approximately 49%, with the remainder of the decrease primarily associated with our high-frequency products. In 2011, the increase in revenue is attributed to $50.3 million in revenues from products related to the ISBU and SDT acquisitions, as well as an increase of approximately 7% in revenues from ASIC products, which was attributable to stronger demand in the mixed signal automotive end-market. These increases were partially offset by decreases in revenue from high frequency products of approximately 14%, which was driven by lower demand in industrial and networking end-markets.

Revenues from the Standard Products Group decreased by $131.8 million or approximately 11% from 2011 to 2012 and decreased from 2010 to 2011 by $23.7 million or approximately 2%. The 2012 decrease in revenue is primarily attributable to decreases in discrete products of $74.1 million or approximately 15%, a decrease in analog products revenue of $28.1 million or approximately 9%, and a decrease in revenue from memory products of $25.1 million or approximately 31% with the remaining decrease primarily associated with our TMOS products. In 2011, the decrease in revenue is a result of decreases of approximately 10% in revenue from our analog standard products and a decrease in revenue of approximate 2% from TMOS standard products.

Revenues from the SANYO Semiconductor Products Group decreased by $289.3 million or approximately 27% from 2011 to 2012 due to the continued impact from the October 2011 Thailand flooding, which permanently damaged one of our SANYO Semiconductor Products Group's manufacturing locations, a softening of the Japanese consumer market, and, to a lesser extent, political tensions between Japan and China which began to impact revenue levels in the second half of 2012.

Revenues from the SANYO Semiconductor Products Group were $1,060.3 million million during 2011. These revenues are the result of our January 1, 2011 SANYO Semiconductor Transaction.

Revenues by geographic area as a percentage of total revenues were as follows (dollars in millions):

                                 Year Ended                              Year Ended                                 Year Ended
                                December 31,        As a %  of          December 31,          As a % of            December 31,          As a % of
                                    2012              Revenue               2011             Revenue  (1)              2010             Revenue  (1)
Americas                       $        467.0              16.1 %      $        560.6                 16.3 %               495.5                 21.4 %
Japan                                   401.2              13.9 %               494.8                 14.4 %                59.5                  2.6 %
Other Asia/Pacific                    1,637.9              56.6 %             1,958.4                 56.9 %             1,384.7                 59.9 %
Europe                                  388.8              13.4 %               428.5                 12.4 %               373.7                 16.2 %

Total                          $      2,894.9                          $      3,442.3                             $      2,313.4

(1) Certain of the amounts may not total due to rounding of individual amounts.

For additional information, see the table of revenues by geographic location included in Note 17: "Segment Information" of the notes to our audited consolidated financial statements included elsewhere in this Form 10-K.

With our acquisition of SANYO Semiconductor in 2011, there has been a shift in our global revenues to the Japan and Asia/Pacific regions, with combined revenues from these regions totaling $2,039.1 million in 2012 and $2,453.2 million in 2011 for approximately 70% of our total revenues in 2012 and approximately 71% of our total revenues in 2011, which, following our acquisition of SANYO Semiconductor, has increased from approximately 62% of total revenues from the same region in 2010.

Gross Profit

Our gross profit by reportable segment in each of the three years below was as
follows (dollars in millions):



                                  Year Ended            As a %  of              Year Ended            As a %  of              Year Ended            As a %  of
                                 December 31,             Segment              December 31,             Segment              December 31,             Segment
                                     2012               Revenue (2)                2011               Revenue (2)                2010               Revenue (2)
Application Products Group      $        459.2                  45.1 %        $        549.0                  47.9 %        $        532.0                  50.5 %
Standard Products Group                  400.9                  36.3 %                 435.7                  35.2 %                 479.8                  38.1 %
SANYO Semiconductor
Products Group                           143.1                  18.6 %                  79.1                   7.5 %                    -                     -

Gross profit by segment         $      1,003.2                                $      1,063.8                                $      1,011.8
Unallocated
Manufacturing (1)                        (51.3 )                (1.8 )%                (55.0 )                (1.6 )%                (55.8 )                (2.4 )%
. . .