Just about every chip company you can name has been affected to some degree by slow-moving automotive and industrial market segments that have resulted in higher inventories and less ability for the chipmakers to raise prices as they might when demand is ahead of supply.
For some of the largest semiconductor companies, automotive sector challenges are not a big percentage of overall revenues, and thus not a huge drag on revenue and earnings performance. For a smaller company like Lattice Semiconductor, which drew almost 60% of its revenue at one point last year from automotive and industrial markets, the recent challenges cause more pain.
In reporting third quarter 2024 earnings this week, Lattice said it posted $127.1 million in revenue for the quarter, a decline of almost 34% year-over-year. Automotive and Industrial revenue was down 7%. This continued a three-quarter trend of Lattice’s revenue falling in year-over-year comparisons, though the Q3 overall revenue market was up about 2% from the previous quarter. The company also acknowledged that it cut about 14% of its workforce, estimated to be roughly around 160 jobs for a firm that as of last year employed more than 1,100 people. This and other cost-cutting actions are expected to result in a 14% reduction in non-headcount operating expenses as well.
These moves come less than two months after Lattice announced industry veteran Ford Tamer as its new CEO following the mid-year departure of previous CEO Jim Anderson.
On Lattice’s Q3 earnings call, Tamer said Lattice faces “near-term, industry-wide headwinds,” but is nearing the bottom of a “U-shaped recovery,” with inventory balance expected to normalize toward the middle of next year.
“We do not expect any additional reductions will be needed,” he added, while also saying that Lattice’s product line-up would not be affected. The company took a one-time GAAP-only charge of $6.5 million related to its cost-cutting actions.
Tamer said that as the company starts to bounce back, it is expecting single-digit revenue growth for the full year of 2025, putting full-year 2025 revenue estimates at around $525 million. In the shorter term, the company expects revenue for the fourth quarter of 2024 to land somewhere between $112 million and $122 million.
“When we look at our long-term fundamentals, the demand recovers in sort of around the second half and then starts driving back to our regular run rates of 15% to 20% revenue growth in ‘26,” he said.
The FPGA market, in which Lattice has long identified itself as targeting the low-power, low-cost part of the market, has been going through significant changes recently. AMD and Intel both have started expanding into the low-power end of the market, and Intel’s Altera FPGA business is nearing its decoupling from the parent company, which Altera says will allow it to expand its market opportunities. AMD’s latest automotive FPGAs, announced in September, also pose a challenge to Lattice’s automotive strength.
Meanwhile, Lattice is pushing hard into AI and growing new product lines, both of which are likely to be main themes at the company’s upcomingLattice Developers Conference in San Jose, California, Dec. 10 and 11.