On December 4, a significant groundbreaking ceremony was held in Tampines, Singapore, marking the establishment of a joint venture between World Advanced and NXP, known as VSMC, set to commence operations in September 2024. Andy Micallef, the Executive Vice President of NXP, shared with attendees that this new venture aims to develop a chip supply chain in China for its clients. This is a crucial step, especially given the growing demand for semiconductor technology in various sectors, including automotive and telecommunications.
According to Micallef, China boasts the largest electric vehicle and telecommunications markets globally. NXP is eager to devise strategies that will enable it to cater to an international clientele seeking manufacturing capabilities within China. While NXP has an advanced packaging and testing plant in Tianjin, it has yet to establish front-end manufacturing facilities in the country. Micallef expressed confidence, stating, "We will collaborate with our partners to build a robust Chinese supply chain. For those clients seeking services in this arena, we have the resources and capabilities to deliver." This proactive approach reflects NXP's commitment to expanding its footprint in China, aligning with the country’s burgeoning technological landscape.
Recent performance reports from major analog chip manufacturers such as Infineon, NXP, STMicroelectronics, Texas Instruments, Renesas Electronics, ON Semiconductor, Bosch, and ADI indicate that the overall health of the automotive chip market has been struggling. The sluggish sales of electric vehicles have impacted these companies, keeping their performances at a plateau. However, there are signs of a turnaround, with some leading firms reporting a mild recovery in their results over the last two quarters, suggesting that the depletion of automotive chip inventories is making progress. The outlook for the electric vehicle sector remains robust, exhibiting a potential for growth and expansion as manufacturers navigate through current challenges.
NXP
In NXP's third-quarter financials, the automotive chip division reported revenues of $1.829 billion, marking a 3% decrease year-over-year yet a 6% increase from the previous quarter. Kurt Sievers, NXP's CEO, conveyed that the cautious behavior of customers has led to soft demand, which may extend to clients in the Western automotive market. This comes amidst profit warnings from automakers and first-tier suppliers striving to manage inventory. Nonetheless, Sievers highlighted that NXP appears to have successfully navigated the cyclical downturn in its operational performance, expecting a return to consistent growth moving forward.
When reflecting on the growth prospects for electric vehicles in China, Ron Martino, NXP's Executive Vice President and Chief Sales Officer, emphasized that electric vehicles continue to represent the fastest-growing segment in both the Chinese and global markets. NXP intends to maintain investments in innovative technologies applicable to both traditional combustion engines and a variety of electric vehicle platforms.
NXP expresses strong confidence in the Chinese market. According to Sun Hang, Senior Market Director for Industry and IoT in Greater China, 2024 will mark the 38th year since NXP entered the Chinese market. The company has been expanding its operations in China, and in 2023, NXP established its first global artificial intelligence application innovation center in Tianjin. Furthermore, the partnership with the Tianjin Economic-Technological Development Area to renew the contract for NXP Qiangxin (Tianjin) Integrated Circuit Design Co., Ltd. for ten years demonstrates NXP's commitment to deepening its engagement in China.
Infineon
Infineon's third-quarter results showed an overall decline in revenue; however, the automotive sector demonstrated remarkable resilience. The company reported revenue of €3.702 billion, representing a 9% drop year-on-year but a 2% increase compared to the prior quarter. Their gross margin improved from 38.6% in the previous quarter to 40.2% this quarter. More notably, the automotive division reported revenues of €2.112 billion, indicating slight growth from the previous quarter. Infineon's silicon carbide business also continued its impressive trajectory, anticipating a revenue increase of approximately 20% for the 2024 fiscal year, aiming for around €600 million (€4.68 billion RMB).
For the 2024 financial year, Infineon expects total revenues to amount to €14.955 billion, down 8% year-on-year. This reduced forecast primarily stems from the sluggish global economy and underwhelming demand in industrial applications. However, the Automotive Electronics Division (ATV) was the only sector to witness growth, particularly in electric vehicles (xEV) and autonomous driving (ADAS) markets. Jochen Hanebeck, Infineon’s CEO, noted that the automotive market’s growth can largely be attributed to an increase in their market share in the MCU segment and their success in China's automotive sector, which has seen a remarkable year-on-year revenue growth.
STMicroelectronics (ST)
STMicroelectronics reported third-quarter revenues of $3.25 billion, a significant year-on-year decline of 26.6%, with a gross margin of 37.8%. The company forecasts revenues for the fourth quarter to be around $3.32 billion, reflecting a 2.2% quarterly increase but a considerable year-on-year drop of 22.4%. This downward projection is attributed to anticipated revenue declines in automotive and industrial sectors, although an increase in personal electronics revenue partially counters these losses. The inventory level at ST is $2.88 billion, remaining steady compared to last year, but with the inventory turnover days extending to 130 days, indicating a slower pace of inventory depletion.
The automotive sector is crucial to ST's revenue, yet this quarter also saw an 18% decline in year-on-year performance in this area. CEO Chery acknowledged that customers further cut orders in the third quarter due to inventory constraints and lack of demand, notably in electric vehicle segments, where consumer interest has slowed and shifted towards hybrid models, particularly in the North American and European markets. Despite the anticipated short-term slowdown, the long-term trends in electric vehicles and automotive digitization indicate a gradual recovery likely to begin in the second half of 2025.
In response to the trend of electrification in the automotive sector, ST is actively advancing its fourth-generation silicon carbide (SiC) MOSFET technology, aimed at enhancing electric vehicles' efficiency, power density, and durability. The company is already securing numerous contracts for traction inverters and on-board chargers, showcasing its commitment to leading the market in next-generation electric vehicle components.
Texas Instruments
Texas Instruments (TI) reported a revenue of $4.151 billion in the third quarter, reflecting an 8.4% year-on-year decline but an 8.6% increase compared to the previous quarter. The net profit was $1.362 billion, marking a 20.3% decrease year-over-year despite a quarterly rebound of 20.9%. The inventory turnover days increased slightly to 231 days. TI disclosed that performance in the industrial sector saw a minor decline while automotive segment revenues spiked, primarily attributed to strong demand in the Chinese market.
CEO Haviv Ilan indicated that the company exceeded profit expectations for the third quarter due to rebounds from the analog chip orders and a bolstered demand from the Chinese automotive market. Reports indicate that the increased sales of TI semiconductor products are largely driven by rising orders from smartphone and personal computer suppliers. Automotive revenue showed a notable quarter-over-quarter increase. Ilan attributes the “strong momentum in China's electric vehicle market” as a key reason for this growth. However, he cautioned that the broader automotive market remains weak.
Renesas
Renesas Electronic Corporation recently published its third-quarter 2024 financial report, revealing a 9% year-on-year revenue drop and a 3.8% sequential decrease. While the automotive sector continues to grow, the industrial/infrastructure/IoT segments are underperforming, negatively affecting overall performance. Automotive sales totaled ¥185.5 billion, which marks a 10.3% increase year-on-year but a 2.6% decline quarter-on-quarter.
In terms of inventory levels, Renesas acknowledged that channel inventories have risen since the previous quarter. While industrial/infrastructure/IoT applications saw reductions, automotive applications increased. Their goal for the fourth quarter is to lower delivery volumes in the automotive sales channel to expedite inventory utilization. The industrial/infrastructure/IoT inventory is expected to stabilize.
ON Semiconductor
ON Semiconductor's third-quarter results showed a revenue of $1.76 billion, which is down from the previous year, particularly within the automotive terminal market where revenues fell by 17.8%. CEO Hassane El-Khoury remarked that the demand environment remains sluggish, with ongoing inventory digest ongoing and terminal demand declining. He characterizes the overall automotive market as still in a weak position, particularly as electric vehicle sales are slowing.
Bosch
Bosch exhibited steady growth from 2021 to 2023; however, 2024 has ushered in a downward trend. Revenue reached €78.7 billion in 2021, signaling a 10.1% increase, with profits soaring to €3.2 billion, reflecting a more than 50% increase. In 2022, Bosch’s revenue rose to €88.2 billion, while profits and operating margin figures also showed significant growth. However, projections for 2024 indicate a profit margin downturn to 4% compared to 2023's margin of 5%, amid global economic challenges and a slow start in the European electric vehicle market. CEO Stefan Hartung has reported a shortfall in orders and that Bosch is confronting the reality of a less than ideal performance. Bosch has embarked on measures such as layoffs and acquisitions to mitigate losses, including a large-scale acquisition plan of $8 billion to acquire the HVAC business of Johnson Controls.
ADI
Analog Devices, Inc. (ADI) reported revenues of $2.312 billion for its third quarter, down by 25%. The company's gross profit was $1.311 billion with a gross margin of 56.7%, marking a 7.1% year-over-year decline. In terms of revenue distribution, automotive sales accounted for 29% at $670 million, with a year-on-year decline of 8%. The industrial sector generated $1.06 billion, contributing to 46% of total revenue but with a year-on-year decrease of 37%.
CFO Richard Puccio noted a slight drop in overall order volume in the third quarter, but a solid recovery is expected in the fourth quarter, particularly within the automotive segment. While macroeconomic uncertainties continue to pose challenges to recovery speed, there’s cautious optimism for robust growth in fiscal year 2025.
Microchip Technology
Microchip Technology reported that its third-quarter performance fell below expectations amid ongoing economic uncertainty, leading to sluggish demand from automotive customers. CEO Ganesh Moorthy stated that the company’s performance in September was as anticipated, with customers continuing to deplete their inventory levels. The impact on European industrial and automotive clients exacerbated this situation. Despite significant reductions in inventory, macroeconomic uncertainties linger, especially during what has historically been the company's weakest seasonal quarter.