Chip Industry’s Earnings Roundup

Editor’s Note: Updated throughout February 2023 for additional earnings releases.

Many companies reported revenue growth in the most recent quarter, but the latest round of chip industry earnings releases reflected some major themes:

• Demand for consumer electronics softened due to inflation, rising interest rates, and post-pandemic market saturation, creating a slump in the memory chip sector;
• Automotive growth remained solid as the supply chain stabilized, offsetting some declines in other business segments;
• Overall, the foundry business remained strong, with most major foundries reporting growth, and
• Reductions in future capital spending and other cost-cutting measures, particularly among memory makers.

Overall, market conditions for most segments are expected to rebound in late 2023. But there are concerns about inflation, the impact of export regulations, and the severity of slowdowns in high-volume chip markets, particularly for the consumer and mobile segments. Initial reports point to a resurgence sometime in the second half, but the chip industry has become so diversified across so many different market segments, some of which are tied to others, that it’s not clear how this will play out.

Memory
The $160 billion memory chip sector is experiencing an historic deterioration of demand in DRAM/NAND, with customers continuing to reduce inventories due to worsening consumer demand caused by ongoing inflation and rising interest rates. Micron’s Q1 revenue (reported in December) declined 46% versus the prior year, which the company blamed on “the most severe imbalance between supply and demand in both DRAM and NAND in the last 13 years,” with DRAM down 49% YOY and NAND down 41% YOY.  SK hynix’s revenue dropped 38% YOY, due to what the company said was sluggish demand and falling price of memory chips.

Looking forward, this sector forecasts a demand rebound in the second half of the year. “Intel’s launch of new server CPU adopting DDR5 and apparent positive signs of demand for new AI-based server memory chips bode well for a quick business turnaround,” said SK hynix CFO Kim Woohyun in the latest earnings release. “We expect to see a quick turnaround when the market bottoms out.”

Over the next few months, Micron expects “gradually improving demand trends for memory as customer inventory levels improve further, new CPU platforms are launched, and China’s demand starts to grow as its economy reopens.”

Foundries
Intel’s Q4 revenue was down 28% (non-GAAP), compared to the same period in 2021, largely due to a drop in consumer demand. But the situation was far different for Intel Foundry Services, which reported revenue growth of 30% for the same period.

In fact, demand for foundry services was up nearly everywhere. TSMC’s revenue grew 27% (U.S.-based), with shipments of 5nm and 7nm accounting for 54% of total wafer revenue. UMC’s revenue grew 15% versus the prior year, with revenue from 22/28nm technologies increasing more than 56% year-over-year. And Samsung Foundry’s quarterly revenue was the highest ever (not separately broken out from consolidated Samsung results), driven by “advanced-node capacity expansion, as well as customer base and application area diversification.”

Looking forward in 2023, Intel expects overall weakness to continue through the first half of 2023, although it is not providing specific guidance beyond Q1. Despite the slowdown, which was met with cost-cutting measures and layoffs, Intel is moving ahead with plans to construct multi-billion-dollar fabs.

TSMC, meanwhile, forecasts revenue in the second half of 2023 to increase over the same period last year in U.S. dollar terms, and to “rebalance to a healthier level.”  TSMC plans to allocate 70% of its 2023 CapEx budget for advanced process technologies, about 20% for specialty technologies, and about 10% will be spent for advanced packaging, mask-making, and others.

Samsung’s Foundry’s outlook for 2023 looks to “increase orders for the 3-nano 2nd-generation GAA process and focus on the development of the next-generation 2-nano process; diversify within applications such as Automotive/IoT.”

Roundup of Announcements
Below are the recent chip industry financial announcements, as well as revenue for some of their largest customers. Quarterly revenue increase/decrease percentages are in comparison to the same periods in the prior year. Note, the below chart will be updated continually over the next several weeks for pending earnings releases, so check back for updates.

Further Reading
Find the latest chip industry stock prices here, along with other recent business news.  Also,  Semiconductor Engineering released its comprehensive Startup Funding Annual Report & Analysis: 2022, including in-depth analysis of where the money went, where it came from, and the reasons behind those investments.