Chip manufacturers caution about weak demand in industrial and wireless technology sectors.

Semiconductor Industry Faces Challenges as Chipmakers Warn of Subdued Demand in 2024

The semiconductor industry is grappling with ongoing challenges as three major chipmakers issue warnings about weakened demand, particularly in the industrial and wireless technology sectors.

Infineon Technologies AG, one of Europe’s largest chipmakers, has revised its sales guidance downward due to declining demand from industrial customers. The company anticipates a significant decline in sales for power and sensor chips used in industrial applications during the second quarter. Infineon’s stock experienced a decline of up to 2.8% in German trading.

Infineon CEO Jochen Hanebeck stated that a noticeable recovery in demand for consumer, communication, computing, and Internet of Things (IoT) applications is not expected until the second half of the year.

Competitors STMicroelectronics NV and Texas Instruments Inc. have also observed a slowdown in industrial production, leading to disappointing forecasts last month.

Nordic Semiconductor ASA’s guidance for the first quarter of 2024 fell below expectations, with Morgan Stanley analysts warning of “prolonged” weakness. The company now predicts revenue between $70 million and $80 million for the first quarter, lower than the estimated $114.5 million. As a result, the stock plummeted up to 23% in Oslo.

The Norwegian firm attributed the decline in revenue to cautious Bluetooth customers and continued inventory drawdowns. Revenue for the quarter dropped by 43% to $108 million.

Renishaw Plc, a manufacturer of encoders for semiconductor equipment, also foresees persistently weak demand in the industry. However, the company predicts an improvement in the second half of the year, causing its shares to rise by as much as 15% in London trading.

Despite a slowdown in electric vehicle demand, the automotive chip market, which accounts for over half of STMicroelectronics and Infineon’s revenue, is expected to remain relatively resilient. Infineon’s CEO stated that the company’s expectations for the automotive market remain largely unchanged.

According to Bernstein analyst Sara Russo, STMicro and Infineon have a stronger position compared to Texas Instruments due to their significant exposure to electric vehicles. Both companies anticipate an increase in automotive revenue in 2024. However, inventory corrections are currently impacting share prices, resulting in lower margins and pressure on top-line growth for the year.

These developments highlight the persistent challenges faced by the semiconductor industry as chipmakers struggle with subdued demand.

Chipmakers are cautioning about weaker demand from the industrial and wireless technology sectors. This subdued demand is expected to impact their sales and revenue in the near future. The industrial sector, which includes manufacturing and automation, is experiencing a slowdown due to economic uncertainties and reduced investments. Similarly, the wireless technology segment is facing challenges as a result of market saturation and slower adoption rates. These warnings from chipmakers indicate potential challenges ahead for the semiconductor industry, highlighting the need for diversification and innovation to overcome these market headwinds.

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