NXP gives disappointing sales forecast as chip slump persists

NXP Semiconductors give a disappointing forecast for first-quarter revenue, signalling that sluggish demand for industrial and automotive chips is lingering.

Revenue will decline about 10 per cent to US$2.83 billion in the period, the Dutch semiconductor company said on Monday (Feb 3). That compares with a US$2.92 billion average estimate from analysts surveyed by Bloomberg.

NXP and its peers have been struggling with a stubborn glut of chips that help power electric cars and manufacturing operations. This oversupply has weighed down sales for much of the industry for more than 18 months. NXP gets more than half of its revenue from the automotive industry, where decreased demand for electric vehicles outside of China has hurt growth.

This ongoing weakness has taken chipmakers and investors by surprise, and companies have had to push back their forecasts for a turnaround. NXP competitors Texas Instruments and STMicroelectronics reported outlooks for this quarter that missed analysts’ estimates last month, with both companies’ shares dropping in the aftermath. STMicro, a Franco-Italian chip supplier to Apple and Tesla, is looking at eliminating as many as 3,000 jobs to cut costs, Bloomberg News reported on Friday.

German competitor Infineon Technologies is set to report earnings on Tuesday.

Rising global tensions might hurt the industry further, Bloomberg Intelligence analyst Ken Hui said. European chipmakers such as NXP “may see deeper and longer down cycles” if the tariffs that US President Donald Trump has threatened to levy on Canada and Mexico hurt the continent’s auto industry, he said.

Tariff hikes on China could similarly extend the slump for Europe’s semiconductor makers, encouraging Chinese chip distributors to lower their inventories ahead of lower demand from US consumers, Hui said. Beijing has also been ramping up its homegrown semiconductor market as part of the technology trade war with the US, and the European Commission has previously warned that the region’s chipmakers are at risk of losing substantial market share. BLOOMBERG