From the Source’s Mouth is Fusion Worldwide’s analysis of semiconductor manufacturers’ quarterly earnings call transcripts. This report provides insights into upcoming demand, capacity, and supply trends based on market information directly from the source. The most recent update features the following manufacturers.
- ON Semiconductor Co. (onsemi) – April 29th, 2024
- NXP Semiconductor N.V. – April 29th, 2024
- STMicroelectronics N.V. (STM) – April 29th, 2024
- Renesas Electronics Corporation – April 25th, 2024
- Intel Corporation – April 25th, 2024
- Western Digital Co. – April 25th, 2024
- Silicon Laboratories Inc. – April 24th, 2024
- MaxLinear – April 24th, 2024
- Seagate Technology Holdings – April 23rd, 2024
- Texas Instruments Inc. – April 23rd, 2024
- Taiwan Semiconductor Manufacturing Co. – April 15th, 2024
This report is updated throughout the quarter. Below are the latest takeaways from Q1 earnings calls, which began on April 18th and run through June 21st, 2024.
ON Semiconductor Co. (onsemi) – April 29, 2024
Key Takeaways
- AI Applications Gain Momentum in Healthcare and Data Center Server Racks.
- Automotive Demand Shifts to High Resolution Image Sensors for ADAS Systems, Inventory Digestion Remains a Challenge.
- Silicon Carbide Market Expected to Double.
- Tailwinds Stem from Silicon Carbide and IGBT Demand in EV Market.
Slowing Automotive Demand Offset by Long-Term Opportunities
Q1 brought a notable demand slowdown with incremental softness the automotive sector. Recovery after Lunar New Year was slower-than-expected, leading to reduced linearity in demand throughout the quarter.
Despite the obstacles, the silicon carbide market still holds growth potential, with Onsemi predicting its revenue will expand at twice the market rate in 2024. Inventory digestion persisted across the automotive and industrial markets, but there was some stabilization towards the end of Q1. Overall, the data center and cloud markets have become a stronger focus for Onsemi, as projections over the next five years are robust.
Silicon Carbide and Cloud and Data Center Markets to Drive Growth
Forecasts predict that the second half of 2024 will bring more balanced supply and demand trends, aided by onsemi’s disciplined approach to inventory management. However, this will take some time to materialize in the market. The focus on silicon carbide and cloud and data center markets will drive growth.
Onsemi plans to increase inventory in distribution channels to prepare for new product ramps in the second half of 2024, along with the ramp of its 200-millimeter silicon carbide substrates in 2025. Additionally, stabilizing traditional industrial business should contribute to a more positive outlook for the rest of 2024 and into 2025.
By the Numbers
- 50% of Over-The-Counter Hearing Aids Utilize Onsemi’s AI Technology.
- Onsemi Expects a 22% Compound Annual Growth Rate (CAGR) in the Cloud and Data Center Market Over the Next Five Years.
- 2X Market Growth in Silicon Carbide Revenue Is Anticipated for Onsemi in 2024.
- Days of Inventory Rose by 15 Days and Distribution Inventory Is at Eight Weeks, Verses 7.2 Weeks in Q4.
NXP Semiconductor N.V. – April 29, 2024
Key Takeaways.
- Industrial and IoT Markets Showed Steady QOQ Growth Thanks to Strict Inventory Management Amidst Cyclical Demand Headwinds.
- Automotive Revenue Declined Due To Excess Supply Amongst Tier 1 Customers.
- Automotive Revenue Will Continue to Drop QOQ, Reflecting Ongoing Inventory Digestion and a Softer Macro Environment.
- Restocking in the Second Half of 2024 to Help Normalize Inventory Across Markets.
NXP Adopts Strategic Inventory Management Amid Variable Revenue Trends
In the first quarter of 2024, NXP reported flat YOY revenue. Internal inventory levels increased, as the company maintained tight distribution inventory. NXP’s purposeful strategy to strictly limit distributor inventory allowed manufacturers to redirect products as needed and navigate soft automotive sector demand more efficiently.
Revenue trends across key markets showed variability. Automotive revenue declined due to Tier 1 customers ongoing inventory digestion. NXP observed that industrial and IoT demand trends continued to improve, with growth in China partially offsetting softness in Europe and the Americas.
Consequently, Industrial and IoT revenue showed steady sequential improvement. Mobile revenue experienced similar noteworthy growth, while Communication Infrastructure and other revenue dipped.
NXP Anticipates Inventory Restocking Despite Mixed Forecasts
NXP forecasts a YOY revenue decline but expects QOQ revenue to remain steady. The projected drop in automotive revenue is attributed to ongoing inventory digestion and a weaker macroeconomic environment. Industrial and IoT segments are expected to grow, along with Communication Infrastructure. Mobile will likely to continue its cyclical recovery.
NXP plans to gradually increase channel inventory starting in Q2 as the company expects restocking to begin in the second half of the year, particularly within the automotive and industrial sectors. This approach aligns with expectations for more normalized inventory levels and benefits from new products and partnerships. Notably, NXP's collaboration with Honeywell for AI-enabled industrial-grade applications could contribute to future growth.
Overall, NXP remains cautiously optimistic about demand growth across all segments for the rest of the year.
By the Numbers
- Q1 Revenue was $3.13B. Q2 Revenue Is Projected at $3.125B.
- NXP Had 144 Days of Internal Inventory, 1.6 Months of Distribution Channel Inventory, and a Cash Conversion Cycle of 105 Days.
- Automotive Revenue Declined 1% YOY, Industrial and IoT Increased 14% YOY, Mobile Increased 34% YOY, While Communication Infrastructure & Other Revenue Dropped 25% YOY.
- NXP Forecasts $3.125B for Next Quarter, a 5% YOY Decline and Flat QOQ.
- NXP Plans to Increase Distribution Inventory to 1.7 Months This Quarter.
STMicroelectronics N.V. (STM) – April 29, 2024
Key Takeaways
- Automotive and Industrial Revenue Declined Significantly.
- Industrial Market to Continue Digesting Inventory Throughout 2024.
- STM Is Expanding Mems Sensor Portfolio to Capture Edge AI Demand.
- Due to Industrial Market Weakness, STM May Adjust Pricing and Product Offerings.
Automotive and Industrial Market Declines Impact Profitability
STM saw notable declines in automotive and industrial revenue. Industrial’s drop was driven by lower order bookings, suggesting inventory correction is taking longer than anticipated.
Demand for Analog products, MEMs, and sensors dipped amongst automotive customers as original equipment manufacturers (OEMs) adjusted their product mix. The microcontroller segment also faced a substantial 30% drop, particularly in general-purpose microcontrollers, based on shifting industrial demand.
Despite these challenges, STM demonstrated a commitment to innovation. The company launched a new all-in-one tool for MEMS sensor evaluation and development, closely tied to the STM32 microcontroller ecosystem. This initiative aims to support the company's broad portfolio of MEMS sensors and promote the embedding of edge AI in inertial modules. The company's focus on innovation continued with the announcement of a sensorless tire pressure monitoring system for e-bikes, further signaling a growing interest in edge AI solutions.
There were signs of resilience in certain areas. Automotive-focused microcontrollers achieved wins in traction inverters, e-compressor controllers, and smart fuses. The company also noted a stable market environment in personal electronics and received awards for its RF front-end modem solutions from a new player in the EDO satellite market.
STM Plans Strategic Adjustments to Address Industrial Weakness
STM expects the industrial sector's downturn to continue, with recovery likely delayed into the Q3 and Q4. The sharp decline in general-purpose microcontroller demand, which predominantly serves the industrial market, is also projected to continue. Due to these forecasts, STM anticipates substantial pricing pressure on the microcontroller and broader industrial sectors. Product offerings, pricing models, or customer engagement strategies may need to adjust to navigate the downturn.
In contrast, automotive-focused microcontrollers will remain resilient, indicating a potential area for strategic emphasis. The automotive segment's strength, particularly in electric vehicles and hybrid technologies, indicates that will be an important focus sector for the upcoming quarter. Additionally, the success in edge AI applications and ongoing partnerships with Compuware for high-performance telecom and AI server power supplies suggest that STM can leverage these efforts to drive growth.
In conclusion, STM's outlook for the upcoming quarter involves addressing continued industrial weakness and potential pricing pressures while capitalizing on growth opportunities. The company's focus on innovation and strategic collaborations will be essential in the challenging market environment.
By the Numbers
- Automotive Customer Demand for Analog Products, Mems, and Sensors Dropped 10%.
- Industrial Declined More Than 40% YOY and Dipped 28% QOQ.
- The Industrial MCU Market Is Expected To Decrease by 30%.
Renesas Electronics Corporation – April 25, 2024
Key Takeaways
- Days of Inventory Increased Due to a Buildup of Work-In-Progress Inventory From Proactive Purchase Orders.
- AI and DDR5 Transitions Are Driving Growth in Data Center and Infrastructure Businesses, Contributing To Significant Revenue Increases.
- Industrial and Infrastructure IoT Segments Are Grappling With a Slowdown, Presenting a Mixed Bag of Market Conditions.
- Foundry and Capacity Trends Show Minimal Dramatic Changes in Raw Material Costs, With Production Adjustments During Summer Due to Holidays.
Inventory Consumption Pulls Down Revenue While Interesting Trends in AI Develop
Inventory days increased due to proactive purchasing, resulting in more work-in-progress inventory. The automotive sector saw a continued rise in projected sales channel inventory, while IoT experienced a decline. Some markets, especially Japan, showed slower inventory consumption, suggesting it will take longer for these sectors to stabilize.
Data center and infrastructure business grew due to positive trends in AI and DDR5 adoption. AI-related products currently make up a small part of total sales, contributing only single-digit percentages. However, the transition to DDR5 is expected to drive further growth, which is a significant development.
Stabilized Demand with Focus on AI and DDR5 Transitions
Demand will increase slightly between Q2 and Q3. Inventory levels in the automotive and industrial sectors will stabilize while further efforts are required to reduce excess inventory. The focus on AI-related and DDR5 transitions, particularly in data centers, will likely drive future growth.
Regarding foundry and capacity, raw material costs are notably stable, and pricing conditions are gradually returning to normal after the swings caused by the supply crunch during COVID-19. Automotive growth is expected to remain steady over the next four years, with power solutions and silicon carbide technology driving this segment. Production will likely increase in the second quarter to offset anticipated shortfalls due to the summer holidays.
By the Numbers
- Inventory Increased to 101 Days.
- 20% to 30% of the Company’s Sales Are to China, With Approximately 6% Contribution To Total Company Revenue, Meaning Renesas Is Less Exposed to Market Pressure in This Area.
- AI-Related Products Contribute Single-Digit Percentages to Total Sales.
- 4-Year Growth Is Anticipated in the Automotive Segment, While the Industrial Infrastructure IoT Sector May Take Longer To Recover.
Intel Corporation – April 25, 2024
Key Takeaways
- Momentum Around the Gaudi Accelerator Series Is Growing, With Over 20 Customers Adopting Gaudi 2 and 3.
- Intel Launched the Open Platform for Enterprise AI Project To Accelerate GenAI Deployments, Which Focuses on Retrieval Augmented Generation (RAG).
- PC Market Slowly Improving and Expected to Grow Further Thanks to Corporate Refresh in Second Half of 2024.
- Data Center and Foundry Business Is Steadily Increasing.
Limited Supply and Wafer-Level Assembly Capacity Cause Challenges
Intel met its Q1 goals and stayed on track for a strong second half of 2024. The rapid growth of the Meteor Lake platform, expected to double in Q2, drove this success. However, assembly capacity at the wafer level created some limitations. Manufacturing supply constraints may continue to limit Intel’s ability to fully meet demand in certain sectors.
The Data Center and AI segment witnessed a surge in demand, propelled by the launch of Gaudi 3 and the anticipated $500M in accelerated revenue in the latter half of the year. Despite a modestly weaker first half, largely attributed to underwhelming general CPU demand, Intel observed a steady rise in interest in its advanced products, including Xeon and Gaudi accelerators.
Growth Forecasted to Continue in the Second Half of 2024
Looking ahead, Intel envisions a robust second half of 2024, with demand propelled by several key factors. An enterprise refresh cycle, in tandem with an expanding PC TAM driven by AI-based PCs, is expected to fuel demand. The data center segment is poised for recovery, with a return to more typical CPU buying patterns, bolstered by the ramping up of accelerator offerings.
In addition, Intel anticipates growth across other segments, including the network and edge businesses, a return to growth for Altera, and a meaningful Gaudi ramp. The foundry business will also contribute to the revenue surge, with consistent profitability and margin improvements into 2025 and beyond.
Overall, Intel's momentum is underpinned by a broader range of products, a rebound in traditional CPU demand, and an increasing adoption of AI technology across various industries. These factors point to a strong trajectory heading into 2025.
By the Numbers
- 40 Million AI PC CPUs Are Expected to Ship in 2024.
- $500M in Accelerated Revenue Is Expected in the Second Half of 2024.
- Nearly 50 Test Chips Are in Intel’s Pipeline, With Growing Interest in Intel 18A.
- The Foundry Market Is Expected To Grow From $110B Today to $240B by 2030.
- Sierra Forest Offers 144 to 288 Cores, Focused on Power, Performance, and Efficiency.
Western Digital Co. – April 25, 2024
Key Takeaways
- Disciplined Spending Created a Tighter Market as Demand Recovered Across All End Markets.
- Flash-Based Solutions Average Selling Prices (ASPs) Increased Alongside Demand.
- Improved Pricing Environment Offset the Ongoing Decline in Consumer HDD Demand.
- Demand for NVMe SSDs Is Rising Again, Driven by AI Applications, Creating a Positive Outlook.
- The Recovery in Cloud Demand and the AI Adoption Trend Are Likely To Propel Ongoing Growth.
Supply Tightness Drives Increased Visibility and Revenue Growth
Last quarter, Western Digital focused on disciplined spending and driving innovation and efficiency to improve supply, which resulted in a tighter market. Limited supply contributed to increased visibility from customers, allowing the company to understand ordering patterns better and plan accordingly. Revenue in all major end markets grew YOY alongside demand, indicating a broad-based recovery.
The sequential revenue increase in HDD was driven by improved nearline demand and higher pricing, with a record-high nearline revenue in the last quarter. This success stems from the company's focus on bringing high-capacity, high-performance drives to market and the restructuring efforts implemented in recent years. These developments and the continued strength of the SanDisk premium brand drove client segment results.
The demand environment in the HDD segment has also benefited from its critical role in AI storage life cycles, particularly in the ingest phase, where HDDs store big data lakes and raw data sets for cost-effectiveness. This role and increased visibility in the HDD market contribute to a cyclical recovery coming off the lows seen in previous quarters.
Regarding other specific product segments, the demand for NVMe SSDs qualified before the downturn returned, with growing interest in higher-capacity points (30-60 terabytes), particularly for AI-related applications. This demand for larger capacity SSDs reflects the company's process of increasing product capacity and employing timely qualification with customers.
AI-Driven Demand and Pricing Strategy Set to Propel Growth
Western Digital expects bit shipments to remain flat for the coming quarter. However, the company expects revenue growth to be driven by increases in Flash ASPs, reflecting a strategic focus on allocating resources to high-value market segments in a tightening supply environment.
Although NAND markets are undersupplied, demand is expected to remain stable. The emphasis on capital discipline remains crucial and the company has delayed business reinvestment initiatives until profitability improves alongside strong long term demand.
The cloud market will continue recovering next quarter, driven by higher nearline demand and better pricing. The AI adoption trend is likely to contribute to this growth, with demand for enterprise SSDs and high-capacity HDDs fueled by large-scale infrastructure developments for AI model training. This cycle of training and inference creates a "virtuous cycle" where models use SSDs for training, and HDDs store the output data.
Western Digital's flash and HDD businesses are separating, a significant development on the horizon. The company is working toward completing the separation in the second half of the calendar year, and it plans to provide further updates as progress is made.
Overall, Western Digital's outlook for the upcoming quarter is cautiously optimistic, with opportunities in both the flash and HDD segments. The recovery in cloud demand, increased enterprise SSD demand, and the critical role of HDDs in AI data storage underscore the company's potential for continued growth. Western Digital aims to navigate this evolving landscape effectively by maintaining capital discipline and focusing on high-value markets.
By the Numbers
- Third Quarter Inventory Was Flat From the Prior Quarter at $3.2B, With Days of Inventory Increasing Four Days to 119 Days.
- Consumer Market Saw 17% Revenue Growth YOY, Based on SanDisk Premium Brand Results.
- Client Segment Revenue Grew by 20% YOY.
Silicon Laboratories Inc. – April 24, 2024
Key Takeaways
- Q1 Revenue Indicates Recovery From the Previous Quarter.
- The Company’s New Series 2 Platform, Featuring AI/ML Capabilities, Gained Traction.
- Inventory Levels in the Distribution Channel Decreased Significantly.
- Focus Pivots to Improving Order Visibility and Maintaining Strategic Die Bank Inventory.
Silicon Laboratories Sees Inventory Reduction and Demand for AI-Enabled Products
Silicon Laboratories' Q1 revenue exceeded guidance, indicating a rebound from the previous quarter's trough. Both business units (Industrial & Commercial, Home & Life) saw growth. In particular, the company's new Series 2 platform, which includes the xG26 and features embedded AI/ML acceleration, gained demand among industrial customers.
The number of days of inventory in the distribution channel decreased, and the total channel inventory also dropped on a unit basis. Average selling prices (ASPs) were flat QOQ.
Product Launches and Enhanced AI Capabilities to Drive Growth
Forecasts for next quarter indicate continued growth in demand, as both business units project a sequential uptick in revenue. Overall, Silicon Labs is optimistic that its new product launches in the Home & Life and Industrial & Commercial markets will drive revenue.
Additionally, AI/ML capabilities are becoming increasingly crucial in products like the xG26, with applications in Edge processing, machine learning, and energy efficiency. This will only serve to drive more demand for products that are already tracking well.
The company expects continued improvement in demand and excess inventory reduction for customers. The focus is working with distribution partners and customers to bring order patterns within standard lead times. This will improve demand visibility as the market recovers. With better order visibility and a strategic die bank inventory, the company is well-positioned to address market demands as the economy recovers. Furthermore, several key leadership changes are taking place, with a new CFO and SVP of Worldwide Operations to help drive scalability and operational excellence.
By the Numbers
- Q1 Revenue was $106M, up 23% QOQ.
- Channel Inventory, on a Unit Basis, Decreased Almost 25% QOQ and 50% YOY.
- Internal Inventory Increased Slightly to $198M.
- Revenue for Q2 Will Be Between $135M - $145M.
MaxLinear, Inc. – April 24, 2024
Key Takeaways
- Maxlinear’s 5G Wireless Infrastructure Business Continues To Grow.
- The Revenue Guidance for Q2 Reflects Uncertainty in Market Trends.
- Connectivity, and Industrial Multi-Market Revenues To Increase, Broadband Revenue May Decline.
- Optical Data Center Interconnect, 5G Wireless, and WiFi Connectivity Identified as High-Growth Markets.
Q1 Revenue Declines, but Positive Signs Emerge in 5G and Fiber PON Markets
Q1 revenue declined QOQ due to various factors, including market trends, seasonal fluctuations, and other external factors not provided in MaxLinear’s report. However, despite the decline, 5G wireless infrastructure continues to drive growth within the infrastructure market due to new millimeter wave, microwave, and hybrid backhaul technologies.
The company also saw continued traction with new design wins in the fiber PON market. Additionally, the Wave700 single-chip tri-band Quad MIMO WiFi 7 device is performing well in qualifications. The initial rollout is expected later this year, and adoption will peak in two to three years.
Infrastructure and Connectivity Expected to Grow Despite Market Uncertainty
The revenue guidance range indicated uncertainty in market trends, as revenue could either increase or decrease sequentially based on projections. Within MaxLinear’s specific end markets, broadband revenue will likely decline. Meanwhile, infrastructure, connectivity, and industrial multi-market revenues may increase based on current demand forecasts.
The CRF family of single-chip platforms for 5G Open RAN radio units is gaining positive response, with expected significant revenue expansion over a multiyear cycle. Furthermore, expectations for the fiber PON market indicate that revenue will double based on solid demand over the next two years.
References to various product ramps in storage, Ethernet, and other domains indicate that production and lead times align with expected increases in demand.
2024 Outlook Bolstered by AI Adoption
Expect sequential growth in 2024 due to improving market conditions and new product launches in high-growth markets like optical data center interconnect, 5G wireless, multi-gigabit PON broadband, and WiFi connectivity.
AI adoption for cloud applications is seen as a catalyst for the transition to higher-bandwidth data infrastructure. AI-related design wins are contributing to early-stage revenues, with more significant production expected later in the year. Strong growth is anticipated, driven by AI-related design wins and broader market trends in data-centric infrastructure.
Additionally, there are prospects for significant revenue growth in storage-related products, Ethernet connectivity, and broadband markets over the coming years, with production ramps and customer collaborations signaling a positive trend.
By the Numbers
- Total Revenue for the First Quarter Was $95.3M.
- Broadband Revenue Was $33M.
- Connectivity Revenue Was $10M.
- Infrastructure Revenue Was $33M.
- Industrial Multi-Market Revenue Was $20M.
- Q2 Revenue Forecasted to Be Between $90M - $110M.
Seagate Technology Holdings – April 23, 2024
Key Takeaways
- Seagate’s Q1 Revenue Grew Due to a Rise in Nearline Cloud Demand From Both U.S. And China-Based Customers.
- The Video, Image, and Analytics (VIA) Markets Experienced Lower Seasonal Revenue.
- Revenue Is Expected To Continue Increasing Next Quarter With Growing Demand for Nearline Cloud Products and Moderate Improvements in Nearline Enterprise and VIA Markets.
- Seagate Anticipates Healthy Nearline Demand Growth Throughout the Year, Driven by AI-Generated Content and Server Growth.
Nearline Cloud Demand Fuel Q1 Revenue Results
Q1 revenue increased thanks to an improved demand environment and an uptick in nearline cloud demand among U.S. and China-based customers. Additionally, nearline cloud demand showed signs of recovery, with sequential improvements in enterprise OEM markets.
Alternatively, the VIA markets had seasonally lower revenue. Smart cities were the one area of strength within this market and the most significant opportunity for VIA products. Regarding other market opportunities, AI continues to drive demand for cost-efficient mass storage, driving strong results for Seagate’s HDD business.
Inventory increased last quarter as part of Seagate’s strategy to support the ongoing mass capacity demand recovery and the ramping of new product lines. The company’s build-to-order initiative allowed for better demand visibility and capacity planning.
Mass Capacity Markets and AI-Related Trends to Drive Q2 Growth
Seagate expects revenue to increase next quarter, with continued demand improvements in mass capacity markets, particularly for nearline cloud products, and moderate improvements in nearline enterprise and VIA markets. Underutilization costs will decrease in the coming quarter and abate by the second half of the year, indicating improved build volume.
The company expects healthy nearline demand growth over the coming quarters and year. Enterprise OEM markets will likely improve once server growth resumes, which correlates with historical trends. AI-generated content will continue to come to market, with larger data sizes from imagery and videos driving demand for HDDs as a cost-effective solution for mass capacity storage. Alongside new product launches, Seagate is dedicated to sustainability within the market, which is why the company’s product circularity program aims to extend the life cycles of products and conserve resources.
By the Numbers
- Revenue in the March Quarter Grew by 6%.
- Cloud Demand, Both in the U.S. and Globally, Saw Strong Double-Digit Revenue Growth.
- Revenue Will Increase 12% QOQ and 16 YOY.
Texas Instruments Inc. (TI) – April 23, 2024
Key Takeaways
- Revenue in the First Quarter Declined Due To Weak Demand Across All End Markets, Which Contributing To Lower Order Volume.
- Increased Inventory Levels on Both the Manufacturer and Customer Sides Further Impacted Q1 Demand, Indicating a Slowdown in Order Intake.
- TI Expects Only a Marginal Decline in Revenue for Q2, Anticipating a Slight Increase in Order Volume as Certain End Markets Begin To Recover From the Inventory Digestion Cycle.
- Long-Term, Ti Is Investing in Competitive Advantages Like Manufacturing and Technology.
Q1 Revenue Declines Due to Weak Demand Across All End Markets
All Texas Instruments (TI) market segments declined, reflecting lower demand in the industrial, automotive, personal electronics, enterprise systems, and communications equipment markets. Communications equipment had the weakest demand trends last quarter. Inventory also increased, both on the manufacturer and customer sides, which contributed to the quarter's lower order volume.
Marginal Decline Expected for Q2, With Gradual Recovery in Key Markets
TI expects revenue to decline once more in Q2, although only marginally. Order volume will likely increase as some of the company’s end markets work through the end of their inventory digestion cycle. While TI generally stays away from forecasting by end market, they did state that personal computing was the first to enter the inventory digestion cycle and will likely be the first to recover. Industrial was later to enter inventory digestion but has steadily worked towards recovery. However, this varies by customer.
For the overall outlook for 2024, the company expects the current environment, with reduced customer inventory levels, to continue impacting revenue. In the long term, TI is investing in its competitive advantages in manufacturing and technology and its broad product portfolio.
By the Numbers
- Q1 Revenue Declined 10% QOQ and 16% YOY.
- Communications Equipment Revenue Declined 25% Last Quarter.
- Total Amount of Inventory Increased by $84M, and Inventory Days Increased by 16 Days QOQ.
Taiwan Semiconductor Manufacturing Co. (TSMC) – April 15, 2024
Key Takeaways
- TSMC Demonstrated Resilience in Q1 2024 by Recovering Quickly From a Major Earthquake in Taiwan.
- Q1 Revenue Slightly Exceeded Guidance, Driven by Demand for High-Performance Computing (HPC) Applications and Technologies.
- The Semiconductor Market, Excluding Memory, Is Expected to Experience a Slower, More Gradual Recovery Following the Inventory Corrections of 2023.
- Emphasis on Advanced Technology at Scale, Such as 3-Nanometer and 5-Nanometer Technologies, Is Expected To Drive Stronger Business Performance in the Second Half of the Year.
TSMC’s Q1 2024 Results Highlight Robust HPC and AI Demand
In Q1 2024, TSMC faced minimal disruptions due to a major-scale earthquake of 7.2 magnitude in Taiwan. The earthquake occurred on April 3rd and temporarily shut down operations. However, the company resumed operations within three days.
Overall, Q1 results were relatively strong, with revenue slightly above guidance. Smartphone seasonality impacted these results but was offset by continued high-performance computing (HPC) application and technology demand.
AI is partially driving the HPC-related demand and will likely continue contributing revenue based on robust 2024 projections. TSMC noted that the forecasted revenue contribution from AI processors will double in 2024, accounting for low-teens percent of total revenue. TSMC expects AI to account for over 20% of its revenue by 2028.
Gradual Recovery with Strong AI and HPC Demand
The semiconductor market, excluding memory, will experience a milder and more gradual recovery throughout the rest of the year, coming off the steep inventory corrections that began in 2023. Macroeconomic and geopolitical uncertainties may persist, potentially impacting consumer sentiment and end-market demand. Foundry industry growth is forecasted to be mid-to high-teens percent, with TSMC anticipating healthy growth throughout the year. Additionally, TSMC noted the smartphone end market is seeing a gradual recovery in demand, while the PC market recovery is slower. Traditional server demand remains slow alongside IoT and consumer market demand.
TSMC expects business to be stronger in the second half of the year than in the first half, driven by increased revenue from 3-nanometer technologies. Profit from 5-nanometer technologies will provide additional support. Continued smartphone seasonality will partially offset these trends.
TSMC is poised to capitalize on AI-related growth opportunities and has noted that the structural demand for energy-efficient computing is accelerating rapidly. AI-related data center demand represents the most robust market trends at the moment. The company’s continued focus is providing advanced technology at scale to support AI innovators and HPC platform growth.
By the Numbers
- Second Quarter Gross Margin Expected to Decline by 1.1 Percentage Points to 52% at the Midpoint.
- 2024 Capital Budget Expected To Be Between $28B - $32B.
- Strategy To Convert Some 5-Nanometer Tools To Support 3-Nanometer Capacity Expected To Dilute Gross Margin by About 1 to 2 Percentage Points in the Second Half of 2024.
