Are automotive chip sales in trouble? NXP and STMicroelectronics' demand is declining! Texas Instrum
In the past few years, the performance of European chip giants has been rising all the way thanks to the popularity of automotive chips and industrial chips. But by 2024, memory chips have made a comeback with the help of AI, while the performance of automotive chips seems a bit lonely.
NXP: Profits fell 7%
On July 23, according to NXP's latest financial report, total revenue in the second quarter fell 5% year-on-year to US$3.13 billion, and NXP's operating profit under Non-GAAP standards in the second quarter was US$1.071 billion, a year-on-year decrease of 7% and a month-on-month decrease of 1%, reflecting that NXP's main business, NXP's automotive chip business, is still in a sluggish sales trend.
In the quarter, automotive chip revenue fell 7% year-on-year to US$1.728 billion, industrial and IoT chip revenue increased 7% year-on-year to US$616 million, mobile chip revenue increased 21% year-on-year to US$345 million, and communication infrastructure and other products revenue decreased 23% year-on-year to US$438 million.
It is worth noting that according to LSEG data, NXP's automotive chip revenue fell the most in three years last quarter, as the automotive industry, which is its main customer, delayed orders due to weak demand.
STMicroelectronics: Automotive chip revenue is lower than expected
STMicroelectronics also said that demand for automotive chips has declined.
STMicroelectronics' Q2 revenue was $3.23 billion, down 25% year-on-year, slightly lower than the analyst consensus of $3.2 billion, and Q2 diluted earnings per share were $0.38, higher than the consensus of $0.35. In addition, the company lowered its annual revenue forecast for the second time because of previous excess inventory and falling sales of automakers that suppressed demand.
STMicroelectronics said it would lower its revenue forecast for this year to $13.2 billion to $13.7 billion, from the previous forecast of $14 billion to $15 billion. This is the second time the company has lowered its annual forecast this year. In January this year, the chipmaker's annual revenue forecast was as high as $16.9 billion.
Jean-Marc Chery, CEO of STMicroelectronics, said in the report: "Contrary to our previous expectations, industrial customer orders did not improve this quarter and automotive demand declined." He said that the revenue of the automotive business was lower than expected, offsetting the growth of the company's personal electronics business sales.
Texas Instruments: The automotive market continues to decline
Texas Instruments' performance is much better than NXP and STMicroelectronics, and several data are higher than market expectations.
Texas Instruments announced second-quarter revenue of $3.82 billion, in line with analysts' expectations; second-quarter earnings per share of $1.22, compared with $1.87 in the same period last year; second-quarter operating profit of $1.25 billion, analysts expected $1.24 billion; third-quarter revenue of $3.94 billion to $4.26 billion, analysts expected $4.14 billion.
However, Texas Instruments also said that the automotive and industrial markets continued to decline.
Haviv Ilan, CEO of Texas Instruments, said that although the industrial and automotive markets continued to decline month-on-month, all other terminal markets were growing, and the company was optimistic about the long-term opportunities for its chips in the industrial and automotive markets. In addition, business in China grew by about 20% in the second quarter. Haviv Ilan added: "We have high confidence in the long-term growth of semiconductors, especially in the industrial and automotive sectors." However, TSMC Chairman Wei Zhejia also expressed a conservative view on the automotive market, saying that the automotive market was originally expected to grow in 2024, but demand was weaker than expected, so the relevant outlook was revised down and it was expected to turn into a recession.
Component distributor Wenyi also revealed the weakness in Europe and the United States from the side. According to Wenyi, its acquired Future Electronics focuses on business in Europe and the United States. It only started to adjust inventory in the third quarter of last year. It will take about four to six quarters to return to a healthy level, or it will take until the fourth quarter of this year to recover. According to analysts, the main reason for the decline in the automotive chip market is overcapacity and weak downstream demand. In the past two years, with the rapid growth of the electric vehicle market, the demand for automotive chips has also soared. In response to the global shortage of automotive chips, many automotive chip companies have built factories and expanded. Due to the poor global economic situation, the growth of the terminal market has slowed down.
The continuous rapid expansion has led to an overcapacity of global automotive chips, resulting in a situation of oversupply in the automotive chip market. Although the automotive industry still has strong demand for certain types of chips, automotive chips as a whole are facing pressure to destock, resulting in insufficient demand.
