Will the chip industry start to decline?

Microchip recently implied in advance that revenue will decline. Is this a sign that the entire semiconductor market is going downhill? Or is the company's foreseeable macroeconomic weakness, revealing the omen of the wafer industry? Some industry players described the declining trend of industrial revenue in this quarter as a “seasonal” phenomenon, while others called it a “cycle” rather than a correction.

Intel (Intel) and Linear Technology (Linear Technology) stressed at a recent financial report that they did not see any abnormal situation as predicted by Microchip Chief Executive Steve Sanghi and the industry may have signs of revision. Among them, Linear Technology’s revenue for the quarter was 371.1 million U.S. dollars, which was 9% higher than the same period of last year. Net revenue grew by 20% to reach 129.5 million U.S. dollars. However, compared with the previous quarter, Linear Technology’s revenue growth rate for the quarter was only At 1.5%, net revenue declined slightly by US$300,000.

However, Linear Technology still mentioned several signs of sluggish growth. The company's financial report showed that orders for the quarter decreased compared to the previous quarter, and the book-to-bill ratio fell slightly. Paul Coghlan, the chief financial officer of Linear Technology, said at the time of the financial report that “access orders have been in decline, especially in the US market;” but he also pointed out that the decline in order shipment ratio is very slight and is roughly in line with last year's situation: “This season The decline for us is more biased towards seasonal rather than structural."

Coghlan also admits that the global macroeconomic climate is showing a weak trend: "Although it has improved but it is not strong;" He pointed out in particular the declining situation in the European market, and the unstable situation in Ukraine is the biggest factor. Financial analysts questioned why Coghlan seemed to be cautious about using the “seasonal” factor to weaken the phenomenon of declining economy. Why did Coghlan think that “We have some knowledge of the macroeconomic situation, but we are not Inside the industry you see the impact you are talking about."

“What we want to give you is our guidance, not to give guidance and be tempered by the political environment;” Coghlan further pointed out: “Our guidelines are always faithfully reflected in the behavior of customers and theirs.” Linear does not see any unusual situation in this area.

Some semiconductor industry analysts admit that the wafer market has slowed down. “We have always believed that the fourth quarter of 2014 was the peak annual growth of the semiconductor industry in more than a year,” said Dale Ford, vice president of IHS Technology. “We therefore agree that growth momentum will begin to slow down.”

"But we did not see an imminent recession;" Ford stressed: "Our forecast is a slow decline." He pointed out that Microchip's earnings data more reflect the company's market, rather than the entire semiconductor industry: " Their statistics may provide some visibility of the industry but more specifically reflect the market they are in."

Semiconductor market revenue trends

Coghlan admits at the financial report conference that this quarter (fourth quarter) is a challenge to the company's forecast; Linear's revenue usually declines in the fourth quarter compared to the third quarter and has been about six years in the past four years. % decline. Based on this trend and the company's current order rate, Linear Technology predicts that revenue in the fourth quarter will decline by 3 to 6% from the previous quarter, but it will grow by 4 to 8% from the same period last year.

Linear Technology's business is similar to Microchip's and covers a wide range of applications. The largest two markets are industrial (43%) and automotive (19%). Only 3% of the business is from highly variable consumer electronics. Similar to Microchip, Linear Technology’s sales in the financial report are based on sell-through; Coghlan said that the company’s forecast is conservative and that the order status in October is only slightly reduced, but similar to last year’s European market. It is still necessary to note that the Chinese market has declined slightly and the Japanese market has performed reasonably.

For Microchip, Ford said the company's performance: "In line with our expectations of the peak period of the business cycle." He pointed out that the semiconductor industry has been cyclical: "Our prediction of the cycle will continue into the future; Microchip used" correction "This is the word, but I think it's more accurate than the correction."

Ford said: "This is not an inventory expansion or industrial misalignment. This is a natural trend for pricing, capacity, and product cycle."