Onsemi (ON Semiconductor) has agreed to sell two of its manufacturing facilities as part of a broader effort to reduce operating costs and improve gross margins, the chipmaker announced on Tuesday.

The company expects the sales to generate approximately $35 million in annual cost savings.

Production plant sales on different timescales

Onsemi plans to sell its Mountain Top production facility in Pennsylvania to Silex Microsystems. This transaction is expected to be fully completed by January 2028. Both companies explained that the long transition period is to allow enough time to move the products made in the facility to other plants in Onsemi’s network, and to ensure no disruptions in its supply to customers.

The second facility, Onsemi’s Tarlac plant, will be purchased by Greatek Electronics, a Taiwanese semiconductor firm. This transaction is billed to be easier to complete, in a shorter three to six months.

The companies said they will work closely throughout the transition to maintain the facility’s operations to a high standard. Customer orders will also continue to be fulfilled without any hiccups throughout the handover process.

Onsemi shares rocky patch after Synaptics deal

Shares of Onsemi fell 23% following the completion of its $7 billion all-stock acquisition of Synaptics, with investors reacting sharply to the deal in what MSN described as a “brutal sell-off.”

The sale of these production plants will remove the fixed costs of running them from the company’s books, helping the company’s management to increase its gross revenue margins after a period of weak demand in the chip and semiconductors market.

However, there is always the chance of the company handing two of its own production lines to outside firms, and the transition involved in these deals could interrupt customer supply and further worsen the company’s financial situation.

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