MCU makers warning: revenue will fall sharply

Semiconductor manufacturer Microchip Technology revealed that the third quarter of the fiscal year ended December 31, 2023, revenue fell more than expected. The company now expects revenues to fall about 22 percent sequentially, a sharp decline from the same period a year earlier. It had initially expected a decline of 15-20 percent. The news caused the company's shares to tumble 4.1% in after-hours trading.

Ganesh Moorthy, Microchip Technology's executive officer, said the recession and lower shipments were the main reasons for the projected revenue decline. He said weak economic conditions prompted the company's customers and distributors to request fewer shipments to reduce inventory risk. This strategic move is a response to the economic challenges encountered in the fourth quarter of last year.
Executive Ganesh Moorthy said in a statement, "The weak economic environment that our customers and distributors faced in the fourth quarter of last year resulted in many of them wanting to receive lower shipments as they took action to further reduce inventory risk." Moorthy noted that many customers had stretched out the closure of their facilities as they continued to manage their operations at the end of last quarter, "This and related factors were the impact of specific unshipped orders that we had originally planned to ship in our fiscal November 2 last year, but did not ship to our customers at the end of the current quarter in December of last year"

Contrary to the revenue forecast, the U.S. Department of Commerce announced a $162 million grant to Microchip Technology. The grant is intended to stimulate U.S. production of semiconductors and microcontroller units (MCUs). These components are an integral part of the consumer and defense sectors. The financial stimulus is expected to help the company offset declining revenues.
Microchip is the world's leading 8-bit microcontroller market share, the scope of its chip applications is quite broad, covering almost all industrial products, in the industrial, automotive, consumer, defense, communications and computer markets, the customer base of more than 125,000, due to the coverage of the diversified and customer-oriented, and thus the market known as an important indicator of the semiconductor market to observe the "canary in the mine," the reputation.

Industry analysts analyzed that Microchip's poor earnings report means that "the canary in the mine fainted first," revealing that the assessment of this year's semiconductor market may require more observation at a time when the general economic situation has not yet stabilized.

The outside world originally expected that after last year's industry inventory adjustment, this year's overall semiconductor market should be able to gradually recover, and subsequently there are AI cell phones, AI PCs and other new topics can drive the industry's medium- and long-term demand, but Microchip's warning seems to make the market feel more uncertainty.

Despite the lower guidance, Jefferies analysts on Tuesday raised their price target on the stock to $100 from $90, saying they believe "MCHP is a beneficiary of the analog renaissance, and we expect long-term and cyclical tailwinds to benefit the group over the next 5 years."

The analysts add that the company could get a boost from "the fourth computing architecture shift," which they describe as a shift toward parallel processing and Internet of Things (IoT) applications, which could include research and development (R&D) "dedicated to highly integrated analog design " and "continued consolidation in the analog industry."

If you like this article, may wish to continue to pay attention to our website Oh, later will bring more exciting content. If you have product needs, please contact us.