On December 4, a significant event took place in Singapore where the groundbreaking ceremony for a 12-inch (300 mm) wafer fab was heldThis facility is a result of a joint venture between World Advanced and NXP, set to commence operations in September 2024. Andy Micallef, Executive Vice President of NXP, made a notable announcement during the ceremony: the intention to establish a Chinese chip supply chain for their clients.

Micallef emphasized that China boasts the largest electric vehicle and telecommunications markets globally, and NXP is actively seeking ways to provide services to international clients who require Chinese manufacturing capabilitiesIt is important to note that NXP currently operates a world-class packaging and testing facility in Tianjin, ChinaHowever, it lacks a front-end manufacturing base in the region

“We will build a Chinese supply chain with our partnersWe have the capability to serve clients who are looking for supply chain solutions from China,” he boldly stated.

Recent financial performances from major analog chip manufacturers—Infineon, NXP, STMicroelectronics, Texas Instruments, Renesas, ON Semiconductor, Bosch, and Analog Devices—indicate that the automotive chip market is still struggling due to disappointing sales and production of new energy vehiclesHowever, there are signs of a turnaround in the automotive market; some leading companies have shown signs of easing in their financial struggles in the last two quarters, effectively reducing their chip inventoriesOverall, the electric vehicle sector continues to see rapid growth, and after weathering this current downturn, it is poised for a more expansive market opportunity.

NXP

In Q3, NXP's automotive chip division reported revenue of $1.829 billion, reflecting a year-over-year decrease of 3% but a quarter-over-quarter increase of 6%. NXP CEO Kurt Sievers highlighted the increasing caution among customers, suggesting that this might extend into Western automotive sectors, partially prompted by warnings from automakers about profit margins and first-tier suppliers striving to further reduce inventory levels

Despite the challenges, Sievers stressed that NXP has successfully navigated through the cyclical downturn of its operations, expecting to see a return to sequential growth.

Discussing the growth prospects for electric vehicles in China, NXP’s Executive Vice President and Chief Sales Officer Ron Martino stated that electric vehicles remain the fastest-growing segment of the market, and NXP intends to invest in innovative technologies across both traditional fuel vehicles and various types of electric vehicles in the future.

NXP appears to have substantial confidence in the Chinese marketSun Hang, the Senior Market Director for NXP’s Industrial and IoT division in Greater China, previously noted that 2024 marks the 38th year since NXP entered the Chinese marketIn recent years, NXP has been optimistic and continuously expanding its business collaborations in China

In 2023, NXP invested in establishing its first global AI application innovation center in Tianjin and signed a ten-year renewal agreement with the Tianjin Economic-Technological Development Area to continue the NXP Strong Chip (Tianjin) Integrated Circuit Design Company.

Infineon

Turning to Infineon Technologies, the company's overall revenue experienced a downturn in Q3, although its automotive sector showed resilienceInfineon reported €3.702 billion in revenue, reflecting a 9% year-over-year decline but a 2% quarter-over-quarter increaseThe gross margin improved from 38.6% to 40.2%, with the adjusted gross margin rising to 42.2%. Noteworthy is the automotive division of Infineon, which achieved €2.112 billion in revenue, experiencing a slight growth compared to the previous quarter

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Additionally, their automotive silicon carbide business continues to thrive, with a projected revenue growth of around 20% for fiscal 2024, targeting approximately €600 million (around ¥4.68 billion).

Looking ahead to 2024, Infineon projects a total revenue of €14.955 billion, which represents an 8% year-over-year decrease, largely driven by global economic challenges and lower-than-expected demand in industrial applicationsThe only department experiencing growth was the automotive electronics division (ATV), particularly in electric vehicle (xEV) and autonomous driving (ADAS) sectorsInfineon CEO Jochen Hanebeck attributed the automotive market's growth to gaining market share in the MCU sector and the success achieved in China, where revenue again showed significant growth, capturing a larger share of total company sales.

STMicroelectronics (ST)

In a similar vein, STMicroelectronics reported Q3 revenue of $3.25 billion, down 26.6% year-over-year, with a gross margin of 37.8%, declining by 9.8%. Forecasts for Q4 suggest revenue could reach $3.32 billion, representing a 2.2% quarter-over-quarter increase but a 22.4% decrease year-over-year

This would lead to an estimated 2024 annual revenue of $13.27 billion, down 23.2% compared to the previous year, reflecting soft forecasts primarily due to expected declines in automotive and industrial sectors, even as revenues from personal electronics provide some offset.

The automotive sector is crucial for ST, yet this quarter, revenues in this sphere decreased by 18% year-over-yearCEO Chery discussed during the earnings call that order reductions from clients were observed in Q3 as automakers adjusted production plans in response to inventory pressures and sluggish demandDemand for electric vehicles has slowed, with a shift towards hybrid models, especially in North America and EuropeAlthough short-term automotive market growth appears to be slowing, long-term trends in electric vehicles and automotive digitalization are projected to continue, with signs of gradual recovery anticipated in the latter half of 2025.

In anticipation of the electrification trend within the automotive industry, ST is actively promoting the fourth generation of its silicon carbide (SiC) MOSFET technology to enhance the energy efficiency, power density, and durability for electric vehicles

Currently, the company has secured multiple customer orders for use in traction inverters and onboard chargers.

Texas Instruments

Texas Instruments reported Q3 revenue of $4.151 billion, down 8.4% year-over-year but increasing 8.6% from the previous quarterTheir net profit was $1.362 billion, reflecting a 20.3% decrease year-over-year but a 20.9% quarter-over-quarter increaseInventory turnover days stood at 231 days, showing a slight increaseAnalyzing performance by end markets, industrial sectors showed a low single-digit decline, continuing reduced inventory levels, while automotive markets experienced high single-digit growth, largely driven by strong performance in China.

CEO Haviv Ilan remarked in a late October earnings call that profits exceeded expectations due to increased orders within various sectors of analog chips and heightened demand from the Chinese automotive market

Reports have indicated a boost in sales volume for Texas Instruments semiconductor products, attributed to increased orders from smartphone and PC suppliers along with recovering demand in endpoint markets, particularly in automotiveIlan accentuated, “The growth trajectory we see in the Chinese electric vehicle market is robust, and our products are continuously gaining traction, which significantly contributed to our third-quarter performance.” However, he anticipates that other automotive markets are likely to remain weak.

Renesas

Renesas also released its Q3 2024 financial report, indicating a revenue drop of 9.0% year-over-year and a 3.8% decline quarter-over-quarter, with profit metrics largely under pressureThough the automotive business continues to grow, sectors such as industrial, infrastructure, and IoT have struggled, weighing down overall performance

In segmented performance, the automotive business achieved sales of ¥185.5 billion, growing by 10.3% year-over-year but declining by 2.6% quarter-over-quarter.

In terms of inventory, Renesas noted that their sales channel inventory has slightly increased compared to the previous quarterWhile there has been a decrease in inventory related to industrial, infrastructure, and IoT applications, the automotive sector has seen an uptickFor Q4, the company aims to reduce the delivery volumes through automotive sales channels and accelerate inventory utilization while keeping the industrial/infrastructure/IoT inventory stableRenesas President and CEO Hidetoshi Shibata noted challenges due to demand falling short of expectations and increased sales channel inventory.

ON Semiconductor

Moving on to ON Semiconductor, the Q3 financial report revealed revenues of $1.76 billion, lower than the previous year's figures

Revenue from the automotive terminal market saw a year-on-year decline of 17.8%. President and CEO Hassane El-Khoury indicated that the demand environment remains weak, as inventory digestion continues and terminal demand shows signs of slowdown.

Bosch

Bosch experienced steady growth from 2021 to 2023, with a noticeable decline entering 2024. Revenue for Bosch in 2021 was €78.7 billion, with a 10.1% year-over-year growth, and profits reached €3.2 billion, increasing by over 50%. In 2022, Bosch's key metrics showed revenue at €88.2 billion, a 12% increase, and profits of €3.8 billion, maintaining a stable operating profit margin at 4.3%. However, in 2023, Bosch's revenue reached €91.6 billion with a 5% profit marginFor the current year, expectations set the profit margin at only 4%, indicating a decline from the previous year.

Bosch Group CEO Stefan Hartung pointed out that the company is facing insufficient orders primarily due to global economic weakness and a slow-starting European electric vehicle market, leading to less than optimal performance

Looking ahead, Bosch anticipates an EBIT margin of only 4% for 2024, down from 5% in 2023 and further from their 7% target for 2026. To mitigate losses, Bosch is actively pursuing restructuring through layoffs and acquisitionsCurrently, Bosch pursues its largest-ever acquisition, proposing an $8 billion buyout of Johnson Controls’ global HVAC business and is also advancing plans for splitting its automotive division into a standalone public entity.

Analog Devices (ADI)

ADI recently disclosed its Q3 2024 fiscal report, revealing revenues of $2.312 billion, a decline of 25% year-over-yearGross profit achieved $1.311 billion, with a gross margin of 56.7%, down 7.1% from the previous yearWithin the automotive sector, revenue totaled $670 million, accounting for 29% of the overall revenue, marking an 8% decrease annually, while the industrial segment generated $1.06 billion, contributing 46% of total revenue, yet reflecting a staggering 37% year-over-year drop.

The Chief Financial Officer Richard Puccio acknowledged a brief drop in overall orders during Q3 but noted a modest recovery in order levels for Q4, particularly within the automotive terminal market

Despite the overarching macroeconomic uncertainties that continue to constrain their recovery, ADI maintains cautious optimism for robust growth in fiscal 2025.

Microchip

Finally, Microchip has issued a forecast indicating revenues and profits below expectations for Q3, attributing this to sluggish demand from automotive clients influenced by economic uncertaintyCEO Ganesh Moorthy noted that Microchip’s performance in September was consistent with their forecasts, given that customers were keen on clearing inventories in light of prevailing economic conditions, further exacerbated by challenges faced by European industrial and automotive clientsWhile inventory has significantly reduced, the company continues grapples with macroeconomic uncertainties as they approach what is traditionally their weakest seasonal quarter.