Disappointing Revenue Forecast from NXP Points to Lingering Chip Demand Woes
Eindhoven, Netherlands - NXP Semiconductors NV has provided a disappointing outlook for its first-quarter revenue, indicating that sluggish demand for industrial and automotive chips persists.
The Dutch semiconductor company announced on Monday that revenue is expected to decline approximately 10% to $2.83 billion during the period. This figure falls short of the $2.92 billion average estimate from analysts surveyed by Bloomberg.
NXP and its industry peers have been grappling with an excess supply of chips used in electric cars and manufacturing operations. The oversupply has hindered sales for most of the industry for over 18 months. Over half of NXP's revenue is derived from the automotive sector, which has been impacted by reduced demand for electric vehicles outside of China.
The ongoing weakness has surprised chipmakers and investors, forcing companies to revise their recovery forecasts. NXP's competitors, Texas Instruments Inc. and STMicroelectronics NV, also reported outlooks for the current quarter that fell short of estimates last month, leading to declines in their share prices. STMicro, a Franco-Italian chip supplier to Apple Inc. and Tesla Inc., is reportedly considering cutting up to 3,000 jobs to reduce costs.
Infineon Technologies AG, a German competitor to NXP, is scheduled to release its earnings on Tuesday. Bloomberg Intelligence analyst Ken Hui warns that rising global tensions could further impact the industry.
European chipmakers like NXP "may see deeper and longer down cycles" if tariffs threatened by US President Donald Trump on Canada and Mexico adversely affect the continent's auto industry, Hui said. Similarly, tariff hikes on China could extend the slump for Europe's semiconductor makers, as Chinese chip distributors would reduce their inventories in anticipation of lower demand from US consumers.
Amidst the ongoing technology trade war with the US, Beijing has been investing heavily in its domestic semiconductor market. The European Commission has previously warned that European chipmakers risk losing significant market share.