From the Horse’s Mouth - Manufacturer Quarterly Earnings Calls

MANUFACTURER

REPORT SUMMARY

onsemi

Onsemi is planning to increase the efficiency of its fab network by expanding both capacity for products and its strategic markets. This strategy is anticipated to achieve cost benefits and meet current supply/demand imbalance in the semiconductor industry. Onsemi also noted the following:

• Predicts the current imbalance will last through 2022 into 2023. 

• Is prioritizing inventory for strategic customers through the channel or direct in response to the supply/demand imbalance.
• Holding on to inventory has the ability to improve the control of where it goes. 

• Indicates the supply constraints are compounded by accelerated demand for electric vehicles, ADAS, energy infrastructure and factory automation. 

• Observes average “normal” lead time is in the six- to seven-week range due to supply constraints. 

Intel Corporation

Intel announced further plans to continue its expansion by investing in new fabs to meet customer demand.  

• This includes breaking ground on two new fabs in AZ in 2021 and another fab to be built in Ohio.

Observes 2021 included two recurring themes: high demand and supply constraints.

• The demand is anticipated to continue due to digitization applying artificial intelligence, pervasive connectivity, cloud-to-edge infrastructure and more.

Anticipates robust growth in data center and network and edge markets in 2022. 

• This in part is driven by the increased need for data privacy and security, which leads to the necessity for edge and on-prem applications. 

Demand has been tempered by supply chain constraints, such as substrate, component and silicon shortages, which is limiting the shipment of finished systems.  

• Intel especially saw this impact automotive, data center and the Internet of Things business.  

• Predicts these supply chain constraints will persist through 2022 and continue in 2023.

To navigate the supply constraints, Intel has signed long-term agreements with foundry partners and substrate and equipment suppliers.  

Seagate Technology

In 2021, Seagate experienced a record-high demand from cloud customers, driven by its 18 terabyte nearline products.  

Hard drives (HDDs) are critical in the data center ecosystem, which in part has contributed to the continued demand Seagate has experienced across its product lines. 

Supply pressures amid COVID-19 and other related events have been seen to cause mass disruption to shipment plans. In particular, the disturbances have limited capacity and contribute to shortages. 

To ramp up production to meet demand, Seagate intends to expand its manufacturing and cost benefits efforts.

• The cost optimization will be driven by technologies that require fewer heads and disks in the production process—offsetting some of the inflationary component pressures.

Western Digital Corporation (WD)

The current complex state of the supply chain has affected Western Digital’s ability to build and ship products. It anticipates the disruptions will subside when the supply chain normalizes, which is dependent on its hard drive (HDD) gross margins in 2022. 

Technology innovation in the digital market is expected to strengthen storage demand. 
WD’s overall cloud end-market capacity remained high in 2021 – this was led by capacity enterprise hard drives.

• While demand was high as reported in the last two quarters of 2022, WD continues to experience impacts to its supply chain due to overall industry disruptions.

For WD’s Flash business, demand was driven by season strength in mobile and consumer sectors. 

• In mobile, WD reported 5G smartphone shipments increased by 60% sequentially and 50% year-over-year.  

• Along with WD’s flash products, its SSD product line, which it optimized for gaming, gained momentum in 2021. Both the SSDs and flash products for gaming experienced growth. This demand was driven by consumers’ desire for improved accessibility, the ability to generate and store content and the emersion of the Metaverse.  

Microchip

Due to the imbalance between supply and demand, Microchip experienced its highest unsupported backlog in its history in December 2021.

• Constraints continue to impact both internal and external factory support in its manufacturing supply chain.

• In efforts to alleviate the strain, Microchip plans to work alongside supply chain partners to secure wafer foundry, assembly, testing and material capacity to provide enough supply to meet demand. 

• Additionally, Microchip stated it will work to acquire constrained raw material and invest in expanding its factory capacity and hire a workforce to support its factory ramps.

QUALCOMM

Qualcomm notes that demand has been strong across all its technologies and has exceeded supply. The ongoing supply chain disruptions have not eased the imbalance.

As a solution, Qualcomm stated its capacity expansion and sourcing initiatives will help improve its supply in 2022. 

Silicon Labs

Silicon Labs increased pricing across all its product lines, which was in response to existing and anticipated manufacturing cost increases.

While Silicon Labs stated its inventory balance was below its target level in 2021, it anticipates higher output in 2022 as a result of capacity expansion.  

STMicroelectronics

To meet ongoing demand, STMicro plans to increase its production capacity to support its strategic initiatives in 2022.

STMicro observed it saw strong demand in the industrial sector in high-end and consumer industrial products. This in part is driven by increased electrification and digitalization in the end market.

• With demand, STMicro stated factory automation, renewable energy, motion control, power tools and home appliances were all key drivers.

Vishay Intertechnology

In 2021, Vishay maximized its production output by expanding its critical manufacturing capacities and setting measurable targets to accelerate growth. This was applied across all global market segments according to the manufacturer's earnings call.

Vishay mentions that inflationary pressures impact the costs. 

The following sectors were large growth drivers in 2021:

• Industrial automation robotics

• Computing market

• Telecom segment (5G)

• Commercial avionics

• Medical

• Consumer sector

  • Air conditioning

  • Television

  • Gaming

Vishay intends to meet supply and demand by balancing its in-house and foundry wafer manufacturing.

• The in-house wafer foundry expansion efforts include building additional wafer fabs over the next three to four years.

Taiwan Semiconductor Manufacturing Company (TSMC)

TSMC anticipates 2022 growth will be due to demand for its advanced and specialty technologies including:

• Smartphones

• HPC

• The Internet of Things (IoT)

• Automotive

In 2021, supply security was a challenge across the supply chain TSMC notes in its earnings call. 

• TSMC stated that it is unclear at this point if the short-term imbalance in supply security will persist, but the long-term appears to be driven by higher demand for 5G and HPC-related applications. 

Also, there has been a higher demand for silicon, which is applied in end devices for automotive, PCs, servers, networking and smartphones. This is likely to carry from 2021 into 2022. 

A major hurdle going into 2022 is the cost challenges in manufacturing: 

• • The complex nature of mature node processing 

  • Time and investment in manufacturing expansion initiatives

  • Rising material and commodity costs 

AMD

In 2021, AMD’s business was driven by the strong demand it saw in premium notebooks and higher-end desktop CPUs. 

AMD will focus on meeting demand by securing capacity in 2022. 

Texas Instruments Incorporated

In 2022, Texas Instruments plans to continue to expand its internal manufacturing initiatives. This includes building additional factories to increase its control amid supply chain disruptions.  

Allegro MicroSystems

Allegro’s initiative to diversify its supply chain minimized the impact of major supply chain delays in 2021.

Main sectors accounted for were automotive and industrial.

• The supply constraints in its industrial sector led to a record-level backlog according to its earnings call. 

As seen in 2021, orders continue to outpace supply in 2022

Securing additional capacity will be a key initiative in 2022, particularly as TSMC ramps up its wafer production. 

Previous capacity constraints are in part due to COVID-19’s impact on Allegro’s Malaysia facilities.  

An additional constraint factor is industry-wide supply and demand imbalances of wafer supply. 

Allegro anticipates demand will continue to exceed supply into the near future according to its earnings call. 

Cirrus Logic, Inc.

Cirrus intends to drive diversification in its product line in 2022. This includes investment in new technologies, such as sensing and power and battery systems. This is in addition to its existing audio and mixed-signal businesses.  

Nvidia

Strong demand has been driven by emerging technologies for hybrid work environment builds, 3D design, AI, and rendering.

Additional business growth seen in Nvidia’s networking products applied for computing, supercomputing, enterprise, and storage.

Nvidia plans to improve its capacity to meet customer demand in the coming quarters.  

Analog Devices, Inc. (ADI)

Analog Devices, Inc. expanded its capacity to meet demand. This included internal manufacturing capacity investments in the US and Europe.

• Expansion is an initiative to address the imbalance between supply and demand. 

• It is intended to improve ADI’s manufacturing capabilities. 

ADI is seeing Industry 4.0 technologies impacting overall business with sensing, edge, processing, and connectivity adding to demand for advanced parts.

Some of the higher-demand segments include automotive and communications.  

Applied Materials, Inc. 

Applied Materials’ state-of-the-art logistics service center in Austin, Texas is on track and will open in 2022 as a part of ongoing strategies for improved global infrastructure.  

Unmet demand for wafer fabrication equipment is continuing into 2022 from the previous year. 

The essential importance of silicon is evident in how it drives system level, power, performance, and cost improvements that will be highly valuable in digital transformation and pioneering the metaverse. 

• The limited availability of silicon components necessary for subsystems has been a major manufacturing obstacle.

Infineon Technologies

Target applications for manufacturing capacities and inventory include automotive, industrial, data center and IoT are not predicted to reach supply/demand equilibrium anytime soon.  

Underlying structural demand is healthy and Infineon is fully booked for 2022.  

Profitability levels for the December quarter: 

• Global car production slightly improved in comparison to 2020, with 76.4 million units .

Return to office push and platform updates from processor vendors has led to prolonged demand from cloud operators and hyperscalers. 

II-VI Incorporated

II-VI Incorporated's constraints were linked to COVID-19 and supply issues, resulting in profits beneath the high-end of revenue guidance.

• ROADMs and transceivers were areas that contributed to large revenue gaps.
• Cloud and large enterprise customers supported heightened demand for datacom transceivers and open line systems.
• 200G and 400G output, plus early ramps for 800G, made exceptional improvements in regards to services for hyperscalers and strategic customers.
• Increased demand for telecom equipment customers demonstrates the start of a ROADM demand ramp that should expand throughout the 2022 calendar year. 

Legacy and new supply lines will increase supply of ICs.

The new year marks the beginning of a multi-year upgrade of U.S. cable TV infrastructure, which is a long-term contract that will power growth based on large fiber-deep initiatives.  

Monolithic Power Systems 

Highlights for 2021 included: 

• New 8 inch fab now operational and plans are in place to certify parts in the 12-inch fab, functionalized in 2020.  

• Continued capital applied to growing fab and assembly capacity.  

• Designing processor cores and MCU technology for products that charge through USB, smart motor drives and high-power electrification.   

NXP Semiconductors

Strong demand throughout 2022 is anticipated and likely better than earlier predictions.

Saw a 700-basis point advancement derived from enhanced factory loadings, elevated revenue and positive leverage on operating expenses. 

Customer demand is forecasted to overtake improving supply as the inventory across all end markets remains very low.  

Broadcom

Recovery in enterprise IT spending continued to accelerate enterprise demand.

• Hyper clouds are upgrading their data centers and service providers, telcos have continued to deploy next-generation fiber to the home.
• Wireless grew single digits and core software business remain stable and steady. 

Inventory in supply for Broadcom and its customers remains lean, with lead times staying extended and unchanged. Semiconductor backlog at the close of Q1 continued to grow double-digits compared to the prior quarter. 

Networking revenue of $1.9 billion was up 33% year-on-year and represented 32% of semiconductor revenue.

• Driven by scaled deployment of Tomahawk 4 and compute off loan across numerous hyperscale clients. 

• Campuses switching upgrades continue to accelerate in enterprises. 

Strong growth has continued in Qumran family of products due to investments in 5G backhaul by telco operators worldwide.

• Routing silicon has expanded into hyperscale. This has shifted Ethernet to the back-end network of large-scale AI/ML clusters.

Storage connectivity revenue was $801 million, growth accelerated to 32% year-on-year, representing 14% of semiconductor revenue. 

Marvell Technology 

The acquisition of Innovium adds cloud-optimized switches to Marvell’s feature-rich enterprise and carrier switch portfolio.

• Currently leveraging 5-nanometer technology platform and extensive SerDes Ip to accelerate road map for next-generation 51.2 T switches.

• Broadens the company's footprint across multiple markets. 

Demand continues to be higher than supply, results have been continuously expanding lead times. 

Industry has turned to active electrical cables to solve issues with short-reach connections.

• To meet demand, Marvell has introduced the industry's first 400-gig and 800-gig DSPs for the ADC market, based on the leading PAM4 SerDes technology. 

5G technology rollout and product ramps at multiple gas station customers was a key benefit that led to collaboration with Dell on a new suite of telecom solutions. Includes:

• Co-developed open RAN accelerator card that uses OCTEON Fusion baseband silicon to deliver in-line 5G layer 1 processing. 

Q4 revenue was driven by SSD controllers, utilized in consumer-oriented platforms like game consoles. 

Revenue grew well-above long-term target models for the fourth quarter and fiscal year 2022.