The sluggish demand from Chonbang is leading to a longer-than-expected downturn in the automotive semiconductor industry. While the semiconductor market for data centers is booming due to the artificial intelligence (AI) wave, the demand for analog automotive and industrial semiconductors remains weak. In the prolonged recession, automotive semiconductor corporations are seeking self-help measures, including workforce reductions, but the industry's outlook has worsened as the tariff hike policies of the Trump administration in the United States are expected to significantly impact major clients, including European and Chinese automotive manufacturers.
Corporations leading the automotive semiconductor market have recently lowered their already dim performance expectations further. On the 4th (local time), NXP Semiconductors, the world's second-largest automotive semiconductor manufacturer based in the Netherlands, announced that its revenue for the first quarter of this year is expected to be approximately $2.83 billion (about 4.14 trillion won), a decrease of about 10% from the previous quarter, with earnings per share projected to be $2.59. This figure falls short of Wall Street's expectations of $2.92 billion (about 4.27 trillion won) in revenue and $2.69 in earnings per share. NXP noted that "electric vehicle demand has significantly decreased in regions excluding China while customer inventory levels remain high, leading to a continued oversupply."
Texas Instruments (TI), the world's third-largest automotive semiconductor and industrial equipment corporation, which has been trapped in a nine-quarter sales decline, also announced on the 23rd of last month that its earnings per share for the first quarter are expected to be between $0.94 and $1.16. The midpoint guidance of $1.05 is significantly below the market's expectations of $1.17. Three months ago, TI management stated that the oversupply issue had eased in some markets, but the actual recovery pace has been slower than initially expected.
Habib Ilan, CEO of TI, noted during a recent earnings conference call that "the automotive market is not seeing strong demand that could offset weaknesses in other regions as growth in China is slowing." He emphasized, "Let me be clear; we have not yet seen the bottom." Following the bleak outlook, TI's stock price has dropped about 20% as of the announcement date.
STMicroelectronics, the leading corporation in the market for microcontrollers (MCUs) that control single functions of electronics such as automotive airbags, is forecasted to record a revenue decrease of approximately 27% year-on-year for the first quarter, amounting to about $2.51 billion (approximately 3.67 trillion won). Securities analysts predict that unless STMicroelectronics reduces its operating expenses, the corporation is highly likely to record a quarterly loss for the first time in nine years. Jean-Marc Chery, CEO of STMicroelectronics, stated during the conference call on the 30th of last month that "the slowdown in the automotive sector is pronounced in Europe, and recovery delays and inventory adjustments continue in the industrial sector." He also revealed plans to cut up to 3,000 employees to reduce expenses.
The tariff hike moves by the Trump administration are expected to impose additional burdens on the automotive semiconductor industry. If the high tariffs imposed by the United States on Canada and Mexico come to fruition, the manufacturing costs of automobiles and parts produced in North America are likely to rise, leading automotive corporations to reduce semiconductor orders or seek alternative supply chains. Starting today, China is expected to strengthen its domestic-centered semiconductor supply chain in response to the 10% additional tariff on American goods that took effect, accelerating the adoption of domestically produced semiconductors. The Chinese government has already issued guidelines for major automotive manufacturers to increase the proportion of domestic semiconductors used to a maximum of 25% by the end of this year.