Market Intelligence
July 1, 2024

From the Source’s Mouth Wrap Up – Calling the Bottom of the Cycle image

In the dynamic semiconductor industry, calling the bottom is crucial as it marks the anticipated end of a downward trend and the start of recovery. Despite short-term challenges, most manufacturers are optimistic about their upcoming quarterly projections.  

Based on market reports and information from the surveyed manufacturers, these were the common themes in earnings this quarter: 

  • Eighteen manufacturers are bullish about growth and recovery, driven by improving market conditions, new product launches, and increased demand across various segments.
  • Five manufacturers maintain a cautious optimism, expecting a gradual recovery while staying alert to persistent challenges.
  • Positive developments in the consumer and traditional server markets suggest a stronger recovery is likely by 2025 as the industry tackles ongoing inventory issues.
  • Market analysts expect a subdued outlook for the second half of 2024 due to slow order growth and uncertain visibility, with occasional signs of improvement. 

The following summaries, pulled from manufacturers' earnings calls, indicate a mix of cautious confidence and specific growth drivers for each company, reflecting various stages of recovery and market stabilization in the semiconductor and electronic component industries. 

Taiwan Semiconductor Co (TSMC) expects the recovery for the semiconductor market, excluding memory, will be milder and more gradual as TSMC is more cautious in its outlook. 

Seagate stated nearline cloud markets may reportedly have reached their bottom as the company saw signs of recovery driven by improving market conditions and demand. 

MaxLinear's overall revenue has likely hit its bottom. The company expects to return to sequential growth in 2024, driven by new product launches in optical data center interconnect, enterprise Ethernet, storage accelerators, 5G wireless, multi-gigabit PON broadband access, and WiFi connectivity. 

Silicon Laboratories and Lattice echoed a similar sentiment, expressing optimism about recovery and expecting revenue growth to continue. Improvements in inventory levels and bookings suggest a bottoming trend, with the companies seeing stabilization and further growth ahead. 

Diodes noted improvements in product mix and new product introductions, particularly in the automotive sector, as key initiatives to support market expansion. The company believes these efforts will naturally improve underloading situations and drive market expansion. 

Microchip is cautiously optimistic about hitting the bottom of the cycle by June, with some recovery expected by September. The company sees a mix of positive indicators and ongoing challenges, highlighting the importance of effectively managing revenue trajectories and factory utilization. 

Infineon indicated that consumer, computing, communication, and IoT markets are bottoming but not yet recovering. The company sees typical late-cycle behavior in industrial markets and notes temporary headwinds in the automotive sector despite some green shoots and structural drivers in AI and microcontrollers. 

Western Digital highlighted a cyclical recovery, mainly driven by the increasing value of data and demand for AI-related storage. The company is not declaring victory but feels optimistic about increasing profitability as market conditions balance supply and demand. 

STMicroelectronics believes Q2 marks the bottom point and expects growth in H2, with automotive and personal electronics showing the most promise. The company is confident in its visibility on backlog and sees some green spots indicating a return to growth. 

Intel views Q1 as the bottom and expects sequential revenue growth to strengthen throughout the year. This recovery is supported by enterprise refresh cycles, data center recovery, and AI capabilities driving demand for Xeon processors. 

Renesas maintains that the first quarter was the bottom, with steady growth expected in the automotive segment and strong performance in AI and data center markets. However, some segments, such as industrial and mobile, will see continued sluggishness. 

NXP noted that the Industrial & IoT markets troughed in Q1 2023, with improving demand in China. The company expects a modest cyclical recovery in mobile and sequential growth in communications infrastructure driven by secure RFID tagging. 

Samsung expects a gradual recovery in market conditions, with double-digit quarter-to-quarter growth following a bottom in Q1. Strong demand for AI servers and related cloud services, alongside stable demand in the mobile sector, is anticipated to drive this recovery. 

Sanmina believes the communications market is approaching the bottom after several quarters of decline. The company sees normalization in the supply chain and more predictable forecasts, indicating an end to the downturn. 

Advanced Micro Devices (AMD) notes that the first half of the year was the low point for its embedded business, as gradual recovery is expected through the rest of 2024. Strong performance in the data center segment will drive gross margin expansion, with further tailwinds from the improving embedded market. 

Qualcomm identified the December fiscal first quarter as the bottom, with sequential growth into March and expectations for continued growth into the September quarter. The company anticipates improvement through the year, particularly in the IoT segment, driven by new product launches in consumer, industrial, and WiFi 7 sectors. This indicates that Qualcomm sees signs of recovery and bottoming in its market segments. 

Wolfspeed anticipates the industrial and energy (I&E) markets to begin recovering in the first half of 2025. While there are short-term headwinds on gross margins due to a shift in product mix, Wolfspeed anticipates a recovery starting next year. 

Vishay expects the inventory correction to extend through the second quarter, with a recovery in the second half of the year, particularly in the passive components market serving aerospace and defense. Bookings are also improving in some industrial and computing end markets. The semiconductor recovery is likely to extend into the third quarter. The company is optimistic about its capacity to supply market demands reliably in all cycles. 

Skyworks remains optimistic about long-term growth, particularly in AI workloads, automotive, and industrial markets, despite current headwinds and a steep inventory correction. The company sees opportunities for growth in the automotive sector, indicating a cautious but positive outlook for recovery. 

Analog Devices (ADI) believes it is at the beginning of a cyclical recovery, with bookings increasing and exiting Q2 with a book-to-bill ratio above parity for the first time in over a year. The company expects continued growth during the second half of the year and is confident about a brisk growth year in 2025. ADI sees strong indications of an upward trajectory and expects utilization rates to increase as demand picks up, aiding in margin expansion. 

Marvell is encouraged by stabilizing order patterns in enterprise networking and expects inventory normalization and recovery in the second half of the fiscal year. The carrier end market has shown signs of picking up first, with an anticipated return to growth. The company is optimistic about better visibility and a stronger second half, driven by next-generation products and market demand recovery. 

Broadcom believes this quarter marked the bottom for server storage and anticipates a modest recovery in the second half of fiscal '24. They expect fiscal '24 server storage revenue to decline approximately 20% year-on-year. Broadcom forecasts that non-AI semiconductor revenue will bottom out in Q2 and recover modestly in the latter half of 2024. 

Micron anticipates a robust recovery in the memory industry by the second half of 2025. They expect mid-to-high solid single-digit growth in server shipments, driven by AI and traditional servers. This growth, coupled with tight supply conditions and price increases, particularly in data centers and High Bandwidth Memory (HBM), is projected to significantly enhance profitability and support future investments for sustained market expansion. 

For more detailed summaries of statements made during manufacturers’ earnings calls this fiscal season, please read "From the Source’s Mouth," where Fusion’s market analysts review quarterly reports to provide insights into supply and demand trends within the electronic component industry. 

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