A remarkable downward transition is underway in the chip sector, as evidenced by recent earnings reports and global chip sales stats.
On Friday, the Semiconductor Industry Association reported global semiconductor sales had dropped 3% year-to-year in September, the first monthly decline since January 2020. SIA President John Neuffer cited a “range of macroeonomic headwinds” which other executives have variously said include inflation, possible recession, supply chain woes, geopolitical tensions and war in Ukraine.
Against the current backdrop, however, Neuffer said the long-term market outlook remains strong. “Semiconductors continue to become a larger and more important part of our digital economy,” he added.
China was the hardest hit of the regions in September- year-to-year, down by 14%, while Europe and the Americas were up by 12% and 11% respectively. Worldwide sales were $141 billion in the third quarter, down 3% from a year earlier and a full 6% less than the second quarter of 2022.
Chipmakers have seen a market correction already in the works in which OEMs are holding off new orders to absorb all the chips they bought three months ago or longer to make up for the shortages they experienced during the pandemic. Some companies were even making special deals in 2021 and early 2022 with chip fabs to get the chips they needed.
IN the meantime, demand is down for smartphones and PCs, after consumers bought up these electronics for the pandemic and have paused buying for a while.
Lower demand and an inventory correction for chips have been cited as reasons for lower revenues and earnings per share.
Most recently, Intel saw revenues decline by 20% in the third quarter compared to a year earlier and predicted 2022 revenues will reach $64 billion, well below the $79 billion of 2021. Net income for the quarter was down 85% from a year earlier. Client and data center sales were hit the hardest.
Intel saved itself somewhat by anticipating the declines and planning billions in cost cutting, which will result in layoffs at some point from its 114,000-member work force. Investors initially liked the results, which led to a stock climb of 9% last Friday, but turned into a 2% decline on Monday.
RELATED: Intel plans cost reductions of $3B in ’23 and up to $23B through ‘25
Texas Instruments last week reported third quarter revenue of $5.24 billion, higher than expected, with earnings of $2.56 a share, also higher than expected. Nonetheless, during the quarter the company reported “expected weakness in personal electronics and expanding weakness across industrial.”
Earlier last week, Seagate cited lower demand for drives during an earnings call and announced an 8% cut in its work force.
RELATED: Seagate to cut 8% of its work force amid lower demand for drives
AMD reports earnings Tuesday while Qualcomm reports earnings Wednesday.