Recently, Texas Instruments (TI), NXP (NXP) and a number of semiconductor companies announced the second quarter of 2024 financial results, from the performance situation, operating income and net profit compared to last year is still down year-on-year. At the same time, from the point of view of business segments, industrial and automotive market demand continues to decline. However, from the third quarter earnings guidance, the companies are still optimistic about the future trend of semiconductor.
Industrial and automotive market demand weakness affects the performance of semiconductor companies
July 24 news, Texas Instruments released 2024 second quarter earnings. The financial report shows that the company realized operating income of $3.822 billion in the second quarter, a year-on-year decline of 16%, an increase of 4%; to achieve net profit of $1.127 billion, a year-on-year decline of 35%.
Business segments, analog business revenue of $2.928 billion, down 11% year-on-year; embedded business revenue of $615 million, down 31% year-on-year. The industrial and automotive business continued to decline year-over-year, and all other end markets grew.
Most of Texas Instruments' chip products are used in the industrial and automotive sectors. For the industrial market, Texas Instruments' analog and embedded processing products have a wide range of applications in the industrial market, and according to Texas Instruments' earnings data, the industrial business occupies an important position in its total revenue, and its industrial market revenue accounted for 40% in 2023.
For the automotive market, Texas Instruments can also provide a rich product line, including analog chips, embedded processors, power management products and so on. These products provide automakers with comprehensive solutions covering a wide range of areas such as powertrain, chassis, body, safety, and infotainment. The automotive business is one of the key revenue sources for Texas Instruments. According to the financial report data, the revenue share of the automotive market has been maintained at a high level in recent years, such as reaching 34% in 2023.
Therefore, the weak industrial and automotive market has a significant impact on its overall performance. Affected by this, the past few quarters, Texas Instruments performance continued to decline. 2023 fourth quarter earnings show that Texas Instruments revenue of $ 4.08 billion, down 12.7% year-on-year, down 10% or so, this decline is also mainly affected by the industrial sector weakness and automotive sector demand decline.
Entering the first quarter of 2024, Texas Instruments revenue continued to decline to $3.661 billion, down 16.4% year-over-year and 10.2% sequentially. This indicates a continuation of the downward trend in the industrial and automotive businesses. Among them, the decline of Texas Instruments in the industrial field is more obvious, in the first quarter of 2024, the industrial field of revenue fell by 25% year-on-year, the weak demand in the industrial market is particularly significant impact on its business.
NXP's main business spans a wide range of sectors, providing high-performance mixed-signal and standard product solutions.NXP is one of the world's leading automotive semiconductor suppliers, offering a wide range of automotive chip solutions, including chips for powertrain, body control, chassis and safety, in-vehicle networking, advanced driver assistance systems (ADAS) and autonomous driving.
The company has a strong portfolio of products in the industrial and IoT space that support connectivity, security and data processing for a variety of industrial applications and IoT devices. Products include sensors, microcontrollers (MCUs), radio-frequency identification (RFID) solutions, secure identification technologies, power management solutions and more.
As one of the world's leading automotive semiconductor suppliers, NXP's performance changes can be a better indication of the demand situation in the automotive market. A few days ago, the company announced the second quarter financial results as of June 30, 2024, the results show that the second quarter to achieve operating income of $ 3.13 billion, down 5% year-on-year. 2024 fiscal year, the first six months of the cumulative income of $ 6.253 billion, a decrease of 2.60% compared to last year; the first six months of the cumulative net profit of 1.308 billion U.S. dollars, a year-on-year decrease of 1.43%.
By business area, automotive chip revenue was $1.728 billion, down 7% year-over-year and 4% sequentially; industrial and IoT chip revenue was $616 million, up 7% year-over-year and 7% sequentially; mobile chip revenue was $345 million, up 21% year-over-year and 1% sequentially; and communications infrastructure and other products revenue was $438 million, down 23%, up 10% sequentially.
NXP's overall revenue decline, especially the largest proportion of automotive chip sales decline, signaling that electric vehicles and automotive chip industry is still in a state of weak demand. Since last year, global demand for electric vehicles has cooled significantly, coupled with the gradual withdrawal of government subsidies related to electric vehicles around the world, further weakening the demand for electric vehicles.
The semiconductor industry has also sent positive signals
Then the future of the semiconductor market whether there are also positive signals it, Texas Instruments President and CEO Haviv Ilan talked about, although the company's operating income fell 16% compared to the same period a year ago, but the ring is an increase of 4%, the industrial and automotive ring continues to decline, while all other end markets have grown. Meanwhile, Texas Instruments expects third-quarter 2024 operating income to be between $3.94 billion and $4.26 billion, continuing to show year-over-year growth.
China, now the largest semiconductor market, has largely returned to growth after its electronics manufacturers completed reductions in unused component inventories, said Haviv Ilan, who emphasized that there are very clear signals that customers have significantly reduced inventories. This is a very good sign for our China business.
Texas Instruments is the world's largest analog chip maker. Three months ago, the company said that demand from many of its end customers in the industrial category has begun to improve. World Semiconductor Trade Statistics Organization also recently predicted that the analog chip market size in 2024 the pace of contraction compared to 2023 significantly reduced.
NXP on the subsequent market direction is also more optimistic, the company's President and CEO Kurt Sievers said: "NXP achieved $3.13 billion in quarterly revenues, in line with our guidance targets, all key end-market performance is in line with our expectations. With the second quarter results and guidance for the third quarter, NXP has successfully navigated the cyclical trough in its business and is on track to return to sequential growth."
Looking at NXP's segments, while automotive chip revenue decreased, its industrial and IoT chips saw positive growth, driven by the Internet of Everything trend and the AI automation wave, with revenue of $616 million, up 7% year-on-year and 7% sequentially.
Over the past few months, NXP has also been actively launching new products to meet market demand. At the end of March this year, it launched the world's first 5nm MCU (S32N55 Vehicle Super-Integration Processor), featuring a high-efficiency real-time computing core, a high-security core (up to ASIL-D level standards), and a wide range of network interfaces (including CAN, LIN, FlexRay, and in-vehicle Ethernet, etc.). It integrates a variety of functions such as vehicle dynamic control, body, comfort, and central gateway, and is designed for the software-defined vehicle (SDV) era.
In May, the new MCX W series MCUs supporting multi-protocol wireless connectivity, including standards such as Matter, Thread, Zigbee, and low-power Bluetooth, were released. the MCX W series becomes the preferred solution for wireless applications in the MCX portfolio for scenarios such as edge sensors and controllers for industrial and IoT, smart home devices, and more.
Write at the end
Semiconductor market has gone through a long period of market downturn, earlier is the consumer electronics market demand is low, the semiconductor supply chain inventory water level is high, resulting in the semiconductor market sales continue to decline. Nearly half a year, consumer electronics gradually had a warming trend, the supply chain inventory is also significantly reduced, but the industrial and automotive market demand has begun to weaken, which also allows TI, NXP and other industrial, automotive business accounted for a relatively high proportion of international semiconductor makers performance continues to be affected. However, from the ring situation and the performance of the third quarter is expected to see the rate of decline in the continued reduction, indicating that the relevant industry is showing a warming trend.