NXP slides as weak forecast stokes demand worries among auto chipmakers

Shares of NXP Semiconductors fell 9% on Tuesday and dragged other automotive semiconductor companies lower, as its disappointing quarterly revenue forecast sparked concerns of a delay in demand recovery.

The Dutch company had a day earlier posted its worst quarterly revenue decline in four years and forecast third-quarter revenue of USD 3.15 billion to USD 3.35 billion, compared with analysts’ expectation of USD 3.36 billion.

In an earnings call on Tuesday, CEO Kurt Sievers warned that inventory corrections for NXP’s top customers will stretch into the second half of 2024, beyond its initial expectations.

Automakers had stocked up chips during the pandemic to avoid a supply crunch, but now are grappling with an inventory glut due to lower demand, putting at risk new orders for firms such as NXP.

As a result, CEO Sievers expects 2024 annual revenue to decline in the low single-digit range. NXP expects internal inventory levels to start coming down in the fourth quarter and get back in order in 2025.

Revenue at the company’s automotive segment fell 7% from a year ago as automakers cut new orders amid a soft economy and slowing sales of electric vehicles.

Shares of peers such as Onsemi, Texas Instruments and Microchip Technology fell between 2% and 4%.

Still, NXP said it was seeing growth in China, which accounts for a third of its revenue, due to the rise in battery-electric and hybrid vehicle adoption in the region.

The weakness in NXP’s automotive sector outweighed a 21% revenue growth in the mobile segment, which has seen robust demand for its chips due to the AI boom.

NXP’s third-quarter adjusted profit forecast with a midpoint of USD 3.42 per share was well below the average estimate of USD 3.61.