From the Source's Mouth | Q2 2023

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.  

• Nvidia saw accelerated demand from cloud service providers and large consumer internet companies. This, combined with the engine of generative artificial intelligence (AI) and large language models, drove data center compute revenue to nearly triple year-over-year (YOY). 
• HP revenue expanded, driven by trends in cloud, AI, data, and connectivity. Demand for intelligent edge was the strongest and comprised 20% of total revenue. 
• Broadcom’s hyperscale spending was supported by robust AI demand, which represented virtually all the growth in the company's infrastructure business YOY in the current quarter. 
• Dell had mixed results across all business segments as the company’s largest corporate and global enterprise customers remain cautious in their IT project investments and spending plans.
• Micron stated that memory and storage pricing revenue reached its bottom and may begin a slow recovery through year-end into 2024.
• Jabil saw stronger results than expected in its diversified manufacturing services (DMS), with success driven by automotive and healthcare business demand. 

From the Source’s Mouth is updated throughout the quarter. The table below summarizes key takeaways from Q2, which began on April 1st and concluded on June 30th. 

Jabil Inc. – September 28, 2023 

Key Takeaways:

• Total Revenue for the Quarter Was $8.46B. 
• Fiscal ’23 Income Was Driven By Growth in Renewables in Industrial and Semi-Cap Market. 
• Confirmed Definitive Agreement to Sell Mobility Business to BYD Electronics 
• Electronics Manufacturing Services Revenue Fell 13% YOY. 

Jabil saw stronger than expected results in its diversified manufacturing services (DMS), with success driven by automotive and healthcare business demand. This was offset by continued weakness in connected devices.  

Electronics manufacturing services (EMS) fell 13% YOY due to shifts in cloud business. While overall results were lower than expectations, core margins did increase for EMS thanks to industrial business and a shift in the consigned component mix. 

Jabil plans to continue investing in the following areas due to robust demand projections: 

• Electric vehicles and autonomous driving. 
• AI cloud solutions.
• Renewable energy.
• Healthcare. 

In particular, Jabil identified renewable energy infrastructure, electric vehicles, and cloud data centers as important end markets for emerging technologies. 

Despite choppy overall global demand, fiscal 2024 is forecasted to bring another year of 20% or more in automotive revenue growth. In particular, Jabil identified EV demand as a major target thanks to its growing market share. Jabil is focused on supporting ACES, or ADAS, and autonomous connectivity, electrification, and software-defined vehicle architecture. In addition, the company plans to increase its reach in the EV industry via products such as compute and control modules, power conversion, battery management, optical camera modules, LiDAR, and other sensors, as well as charging solutions. 

The cloud market still represents a relatively small portion of overall global IT spending, but this industry is expected to grow based on several trends. 

• Large hyperscalers and Tier 2 cloud providers, like technology companies and leading financial firms, continue to rely on Jabil’s cloud solutions. 
• The demand for AI and machine learning will spread throughout the cloud industry, including the related data center infrastructure. 
• Jabil is further investing in the main challenges that customers have with AI workloads; these investments include data center infrastructure services, liquid cooling, and silicon photonics. 

A note on Jabil’s other markets. 

• Healthcare grew 9% YOY, and the long product cycles, recession-resistant end market demand, accretive margins, and stable cash flows are going to continue driving success.
• Digital Print and Retail are slowing due to low demand in legacy print and point-of-sale markets, offset by warehouse and retail automation market growth.
• Networking and Storage end markets will continue to weather muted demand throughout the year, but longer-term growth is expected thanks to advanced optical networking and high-performance data center interconnect for supporting cloud and AI.
• Connected Devices’ demand remained soft, reflecting the weakness in consumer spending. The market challenges are expected to continue next year. 
  

Micron Technology, Inc – September 27, 2023 

Key Takeaways:

• Total Revenue for the Quarter was $4.01B. 
• Pricing and Revenue Have Reportedly Bottomed for the Data Center Market. 
• DRAM Bit Demand is Set to Grow in the Mid-Single-Digit Percentage Range Through Year End.  
• NAND Demand Expectations Have Expanded Thanks to Resilient Consumer Market Trends.  

Micron believes that pricing has now bottomed as ongoing demand growth, customer inventory normalization, and industry-wide supply reductions have set the stage for increased revenue. Despite the challenges that faced the memory and storage industry in fiscal 2023, the company did break several records. 

• Achieved the highest annual automotive revenue yet.
• Saw NAND QLC bit shipments rise to new heights for the full fiscal year.
• Reached record revenue share in data center and client SSDs during calendar Q2.
• Introduced the industry’s first 1-beta DDR5 and LP5X DRAM product. Also, first to ship HBM3E samples with industry-leading performance and power efficiency.
• Unveiled the 232-layer NAND SSD products in data center, client, and consumer markets. 

For the data center segment, traditional server demand is still weak, while AI server demand remains strong. Some key trends in this market include: 

• Data center infrastructure operators changing focus from traditional servers to higher-priced AI servers. 
• Despite mixed outlooks, content growth is expected in both AI and traditional servers. With AI training servers requiring significantly higher DRAM and NAND content, this should boost product value and profitability. 
• Data center revenue is expected in fiscal Q1, continuing into fiscal 2024 and 2025. 

The mobile market is still struggling to recover, with calendar 2023 smartphone unit volume expected to be down by mid-single-digit percentage YOY. However, it is forecasted to grow by a mid-single-digit percentage in calendar 2024. AI-enabled mobile phones may be a key growth driver and create a stronger refresh cycle over time, a trend that is anticipated for the PC market as well. 

Industrial and automotive end markets were the most stable and profitable this quarter. In the automotive market, some standout developments are: 

• Memory and storage content per vehicle set to increase for both ADAS and in-cabin applications. 
• EV demand continues to expand and similarly drive higher memory and storage content. 

For the industrial segment, recovery began in Q4 as distribution partners saw healthier memory and storage supply levels. The volume recovery that began in the first half of fiscal 2023 is set to continue into 2024, with customers adopting and implementing IoT, AI, and machine learning solutions. 

Throughout the year Micron reduced CapEx and supply to streamline efforts alongside the market imbalances. In calendar 2024, Micron expects industry DRAM and NAND supply to be low due to structural reductions in capacity, which will keep DRAM and NAND wafer starts significantly below 2022 levels for the foreseeable future. 

A few notes on inventory corrections. 

• Customer inventory levels for memory and storage in the PC and smartphone markets are largely normalized. 
• Supply has also evened out in the automotive market as well. 
• Data center customer supply has improved but will take until early calendar 2024 to stabilize. 
• Customers have begun to make strategic purchases in DRAM and NAND to take advantage of low pricing as the market begins to recover. 

Dell Technologies Inc – August 31, 2023  

Key Takeaways:

• Total Revenue was $22.9B, down 13% YOY and up 10% QOQ. 
• Deferred Revenue Increased Due to Uptick in Software and Hardware Maintenance Agreements. 
• Improvements in Server and Storage Demand Supported Infrastructure Solutions (ISG) Revenue. 
• Dell Expects Stronger Revenue in Q4, and Consequently Increased Forecasts for Revenue in Fiscal 2024. 

By business segment, Dell saw the following results. 

• ISG: Revenue increased 11% QOQ, but declined 11% YOY, following improved server and storage demand. 
• Service and Networking: Average selling price (ASP) expanded further, and AI server revenue increased thanks to demand for generative AI solutions. 
• Client solutions (CSG): Revenue was impacted by the 14% YOY decline in PC unit shipments, even with the sequential increase of 7%. ASP improved, and commercial business continues to show more resilience than consumer. 

There have been signs of stability across a number of Dell’s business segments, including small and medium businesses as well as government partnerships. However, the company’s largest corporate and global enterprise customers are still being cautious in their IT project investments and spending plans. 

Due to these factors, Q3 revenue will be about $22.5M - $23.5B. For the full fiscal year 2024, Dell increased its expectations and believes revenue will reach between $89.5B - $91.5M thanks to strong sequential growth in the final quarter of 2023. 

Broadcom Inc – August 31, 2023 

Key Takeaways:

• Quarterly Revenue Was $8.9B, up 5% YOY. Consolidated revenue for next quarter will be $2.97B. 
• Semiconductor Solutions Revenue Increased 5% YOY to $6.9B. 
• Infrastructure Software Grew 5% YOY to $1.9B. 
• Wireless Business Remained Stable and Expected to Grow 20% QOQ. 

Generative AI investments are driving the continued strength of Broadcom’s hyperscale spending. AI business is now over $1B and represented virtually all the growth in the company’s infrastructure business YOY this quarter. 

Related to end market demand: 

• Networking: Generative AI had a major impact on results, causing an increase of 20% YOY. Switches, routers, and custom silicon AI engines drove growth in this market. 
• Wireless: Revenue was up 4% QOQ and flat YOY. Engagement with a North American customer was the main point of expansion, with strategic investments across WiFi, Bluetooth, Touch, RF Front-End and Inductive Power. This market will grow 20% sequentially moving forward.
• Server Storage Connectivity: After being flat YOY, revenue is expected to be down mid-teens percent YOY next quarter.
• Broadband: A minimal 1% YOY increase after nine consecutive quarters of double-digit growth. Despite the deployment of 10G-PON among telecommunication customers, revenue is going to decline in the high single digits YOY.
• Industrial: Declined 3% YOY following weak demand in China. Resales will be up in the low-single-digit percentage YOY. 

Infrastructure software revenue grew 5% YOY and now accounts for 22% of total revenue. Overall, revenue for semiconductors solutions represented 78% of total revenue, an increase of 5% YOY. 

Over the past quarter, the company had already received substantial orders for next-generation Tomahawk 5 switch and Jericho3-AI routers and plan to begin shipping these products over the next six months to several hyperscale customers. The company also plans to expand its focus on networking and supporting generative AI’s growing demand.  

Hewlett Packard Enterprise Co – August 29, 2023 

Key Takeaways:

• Total Revenue was $7B, Up 3.5% YOY and 0.5% QOQ. 
• Intelligent Edge Had the Largest Growth, with Operating Profits Doubling This Quarter. 
• HPC and AI’s Order Books Were Elevated by Quarter End and Will Likely Stay High. 
• Revenue for Next Quarter Will Be Between $7.2B - $7.5B. 

By business segment, HP saw the following YOY results: 

• Intelligent Edge up 53%. 
• HPC and AI up 3%. Order book remains elevated.
• Storage down 2%.
• Compute down 10%.
• HPEFS up 7%.
• Corporate Investments And Other up 7% 

Sequential demand increased in the compute segment, with predictions that this will continue thanks to demand amongst customers seeking a solution to run AI interface workloads. 

The overall increase in HP’s revenue is largely due to the company’s diverse portfolio, which capitalized on major trends in cloud, AI, data and connectivity this quarter. Intelligent edge had the strongest demand, with 20% of total revenue coming from customers in this market. Additionally, all regions around the globe contributed to intelligent edge revenue growth, with segment revenue increasing near double digits. 

Some general notes on the market landscape were as follows: 

• Customers continue to prioritize data first digital transformation, even with macroeconomic concerns. 
• Broader IT industry is still feeling the pressure of the economic trends, but demand for HP products grew across all of the companies’ segments. 
• Demand was driven by areas like AI and HPE GreenLake. HPE GreenLake orders rose 122% YOY. 

Nvidia Corporation – August 23, 2023  

Key Takeaways:

• $13.51B in Revenue for Q2, Up 101% YOY. 
• Data Center Revenue Increased 141% QOQ and 171% YOY. 
• Professional Visualization Increased 28% QOQ Driven by Ada GPU Architecture. 
• Announced Three New Desktop Workstation GPUs Based on New Ada GPU Architecture. 

Data center compute revenue nearly tripled YOY thanks to accelerated demand from cloud services providers, large consumer internet companies, and the rise of trends in generative AI and large language models.  

In addition to consumer internet companies investing in AI, enterprises are also deploying their own generative AI, which is driving demand for NVIDIA power instances in cloud and on-premises infrastructure. Some of the applications for AI include: 

• Boosting productivity for office workers and software engineers, especially via programs like AI Copilot. 
• Marketing, media, and entertainment are using AI to develop content engines. 
• Companies like Shutterstock are using Nvidia Picasso for 3D scene artwork. 
• Enterprise-ready servers for IT computing companies like Dell, HP, and Lenovo. The Grace CPU with Hopper GPU has entered production and will be available this quarter in OEM servers.
• Platforms for 5G and 6G, which Nvidia is already working on and is planning to launch in Q2 of 2024. 

Nvidia’s professional visualization revenue increased by 28% QOQ and declined by 24% YOY. The sequential growth was driven by a few factors: 

• Rollout of Ada architecture for laptop workstations, with a planned refresh for desktop workstations that will improve memory and AI performance capabilities. 
• Announcement of three new desktop workstation GPUs based on the Ada architecture: the Nvidia RTX 5000, 4500, and 4000. 

Automotive revenue was an area of decline for Nvidia, falling 15% QOQ but rising 15% YOY. 

• YOY growth came from the ramp of self-driving platforms for new energy vehicle makers. 
• Lower overall automotive demand, particularly in China, contributed to the sequential drop. 

China’s market demand was within expectations and accounted for 20% to 25% of revenue. Regarding the China situation, Nvidia said the following: 

• Regulations on Nvidia products, including data center GPUs, are not expected to have an impact on financial results in the short term. 
• In the long term, restrictions will influence opportunities and competition for U.S. industries. 

Gaming revenue also increased this quarter, rising 11% QOQ and 22% YOY, fueled by GeForce RTX 40 Series GPUs for laptops and desktops. Nvidia believes that global end demand is recovering after last year's slowdown. Some notes on the market landscape moving forward: 

• Nvidia sees a significant upgrade opportunity ahead, as only 47% of the company’s installed base has upgraded to RTX. 
• GPU-powered laptops have gained popularity, with a boost in growth from back-to-school season, led by RTX 4060 GPUs.  
• The introduction of the GeForce RTX 4060 and the GeForce RTX 4060 TI GPUs will create new opportunities as prices come down after the initial launch. 
• Bringing AI to gaming will create a new user experience and attract new players. 

To support future growth, Nvidia has partnered with MediaTek to develop automotive SoCs and incorporate them into a new product line of GPU chiplets. Demand for data center platforms is also broad and widespread across numerous industries. The company plans to lower cycle times and work with supply partners to increase capacity and support production. Nvidia is also developing new L40S GPUs to address demand for types of workloads from cloud to enterprise.  

Vishay Intertechnology, Inc. – August 8, 2023 

Key Takeaways: 

• Revenue Was $892.1M, Above the High Point of Guidance. 
• Automotive Revenue Grew 9% YOY and Pushed OEM Revenue 19% Higher YOY. 
• Aerospace and Defense Revenue Increased 22% YOY and Represented Vishay’s Fastest-Growing End Market. 
• Next Quarter Revenue Is Estimated To Be Between $840M To $880M. 

Revenue increased 2.4% sequentially after a 2.6% increase in volume, which was slightly offset by a 0.7% dip in pricing. MOSFET volume expansion, inductor volume increases, and higher pricing drove revenue. 

By end market, revenue was as follows: 

• Automotive revenue grew 9% YOY and 22% QOQ. 
• Industrial revenue fell 7% YOY and was flat QOQ. 
• Medical revenue was down 5% QOQ but up 22% YOY.
• Aerospace and defense revenue grew 23% YOY and 11% QOQ.  

In the ‘other’ market segments that Vishay maintains, revenue declined 7% QOQ as a result of price pressure on products sold to customers in Asia and ongoing weak consumer demand. Improved delivery of allocated products to automotive, industrial, and aerospace defense customers helped distribution revenue increase 4% sequentially, but ultimately, it fell 6% yearly.  

In the automotive market, there is sustained demand in all regions for products that support increased electronic content, ADAS features, EV and hybrid vehicles, plus an improved flow of orders for legacy automotive programs because of easing supply chain bottlenecks. OEM revenue grew 19% YOY because of strong demand from automotive customers, particularly in the Americas, as they work to build up inventory. In capacity expansion news, Vishay is doing the following to support the automotive industry: 

• Increasing MOSFET capacity by completing the new facility in Germany by 2026. 
• Growing its automotive capacity by 10% in 2024 and 30% in 2026, supported by the recent supply deal with two of the company’s foundry partners to increase wafer supply.
• Expanding manufacturing for opto products at the low-cost Krubong, Malaysia assembly site.
• Seeking qualified subcontractors already producing non-automotive resistors for some commodity products.  

In addition to supporting the automotive industry, these expansion plans will support the industrial business segment. Industrial customers mostly normalized their inventories this quarter, and deliveries of allocated products stabilized this quarter. However, even with supply chain constraints easing, the demand in China was sluggish, and recovery has been slow. However, EV charging infrastructure and improvements to the electric grid to support charging initiatives helped keep revenue flat sequentially. 

Medical customer revenue declined because of the timing of orders and mix, but there was strong demand for diagnostic equipment and implantable devices. The book-to-bill ratio closed at 1 to 3 by quarter end, which is why the market is expected to expand sequentially. 

Aerospace and defense was one of the most rapidly growing end markets thanks to strong commercial aviation sales and increased government spending on weapons systems in Europe and the U.S. 

Qorvo Inc. – August 2, 2023 

Key Takeaways: 

• Revenue Was $651M, Above the Midpoint of Outlooks Provided Last Quarter. 
• Qorvo’s Automotive Business Is Expanding Following New Partnerships With U.S. -Based Manufacturers and European-Based OEMs. 
• Silicon Carbide Power Devices Are Amongst Qorvo’s Growth Drivers, Largely Within the AI Industry. 
• Forecasts for Next Quarter Indicate Revenue Will Be About $1B, Plus or Minus $15M. 

Strength in the aerospace, defense, and automotive markets offset the impact of consumer market oversupply and weak demand in 5G infrastructure. Factory production levels improved modestly but remained low. With headwinds from elevated inventory levels expected to continue, predictions for Qorvo’s growth targets by segment are as follows: 

• Connectivity and sensors will have strong double-digit growth. 
• High-performance analog will have more conservative double-digit growth. 
• Advanced cellular will have mid to high single-digit growth. 

For the automotive industry, there were some standout developments. Some of the quarterly highlights included: 

• Qorvo was selected by a US-based tier-1 automotive manufacturer to supply ultra-wideband connectivity for new EVs. 
• The company was also chosen by a leading automotive antenna provider to create products for a major European-based OEM. 
• In recent design win activity, Qorvo’s automotive opportunities include DC to DC converters, onboard chargers, smart interiors, RF front ends for 5G, Wi-Fi and V2X connectivity, radars, and ultra-wideband secure car access for key fobs and in sidecars. 

Design win activity spanned applications like highly integrated IoT connectivity solutions within the connectivity and sensor market. Qorvo has targeted sensors and ultra-wideband as growth areas. In advanced cellular, Qorvo is growing its product portfolio for 5G smartphones, and within the year, about 45% of Android smartphones will be 5G. Qorvo expanded its connectivity system business to support top smart home ecosystem customers. 

Additionally, there was a standout trend in the aerospace and defense industry, Qorvo noted that there has been an increase in a “one-to-many” migration. Companies are shifting towards a model where a single platform or system will be able to serve multiple applications or functions. In the context of aerospace and defense, this trend involves the consolidation of various capabilities and functionalities into a unified platform or system, allowing for greater efficiency, flexibility, and cost-effectiveness. Some key areas that Qorvo has identified as growing segments include: 

• Manned aircraft and drone technology. 
• Large keyhole satellites, plus many more LEO satellites. 
• Future communication systems and system upgrades incorporating more electronics and requiring greater integration across higher volumes. 

Qorvo is supporting the AI industry through silicon carbide power devices. While AI customers are the main target, these products can be utilized by any industry looking for an efficient server power supply. 

Advanced Micro Devices, Inc. – August 1, 2023 

Key Takeaways:

• Revenue Declined 18% YOY To $5.4B. 
• Despite a 54% Decline in Client Revenue, AMD Forecasts that Revenue Will Increase QOQ in This Segment Thanks to Seasonal Trends and AI Demand. 
• New Storage and Networking Solutions, Plus Strong Demand From Several Industries Drove a 16% YOY Increase in Embedded Segment Revenue. 
• Revenue for Next Quarter Will Be Around $5.70B. 

Revenue by business segment was: 

• Datacenter revenue declined 11% YOY to $1.3B. 
• Embedded revenue increased 16% YOY to $1.5B. 
• Gaming revenue declined 4% YOY TO $1.6B.
• Client revenue declined 54% YOY to $1B. 

Datacenter market demand remains mixed as cloud customer buying behavior is still cautious. Despite the dynamic conditions, AMD is investing in its supply chain to support strategic data center growth. While the company is forecasting results for next quarter will be flattish, they still identify data centers as a significant growth market, as a result of AI demand. In particular, some of the trends that AMD is noticing with AI are the following: 

• AI is expected to drive higher fourth-generation EPYC and Ryzen 7000 processor sales. 
• The market for AI accelerators will likely reach over $150B by 2027. 
• Demand for AI products is strong, so AMD is increasing AI-related R&D and further investments in go-to-market initiatives. 

The decline based on YOY revenue resulted from lower third-generation EPYC processor sales stemming from softer enterprise demand. However, on a sequential basis, sales of these processors were more robust, specifically Gen 1, partially offset by a decline in adaptive SoC product sales. Looking ahead to next quarter, data center revenue will be flattish. 

Within the embedded segment, revenue declined 7% QOQ because of weaker communication market demand. The 16% YOY increase was caused by solid demand amongst industrial, vision and healthcare, automotive, and broadcast customers. Some of the key developments within this segment included: 

• Embedded CPU sales grew following the launch of new storage and networking solutions. 
• Revenue for this vertical will decline in the second half of the year as lead times stabilize and customer inventory levels come down. 

Gaming business revenue dipped by 10% QOQ, with higher semi-custom revenue and lower gaming graphic sales. Microsoft and Sony had healthy console demand, which drove stronger results for semi-custom SoC sales. Gaming will continue to decline next quarter due to the lack of upcoming demand. 

The significant YOY decline in the client segment came from reduced processor shipments, weaker PC market demand, and ongoing inventory corrections. Revenue did increase 35% sequentially because of Ryzen 7000 series CPU sales following the launch of new notebooks from the largest OEMs. Seasonal trends should boost revenue in this segment, plus AI will be a significant demand driver for PCs. Profitability should increase next quarter, so the client segment is forecasted to grow by double-digit percentages. 

Allegro Microsystems Inc. – August 1, 2023 

Key Takeaways:

• $278.29M Total Q2 Revenue, Up 28% YOY. 
• Automotive Revenue Grew 27% YOY. 
• E-Mobility Sales Increased 58% YOY. 

Increasing interest rates, inflation, and geopolitical concerns created challenges for predicting and planning the company’s future performance. In particular, the rapidly changing business environment in China is contributing to the difficulties and causing issues with quarter-to-quarter visibility. The revenue results for Allegro’s business segments were as follows: 

• Automotive revenue grew 27% YOY to $190M, with e-mobility applications increasing by 58% YOY.  
• Industrial sales were 70% higher YOY and totaled $68M. 
• Consumer and computer applications revenue declined 27% YOY to $20M.
• Magnetic sensor sales $174M, up 27% YOY.
• Power product sales were $104M, up 29% YOY. 

The business environment in the first half of the year led to favorable results for industries like automotive, as well as certain industrial segments like clean energy and automation. In automotive, about 60% of design wins were in e-mobility, showing the appetite for ADAS and the increasing electrification of vehicles. Additionally, automotive revenue outpaced production growth, which only grew about 6% in the same time. In terms of future demand, forecasts show: 

• Automotive production will remain robust, increasing by 5% in 2023. 
• EV sales are projected to grow about 30%. 

However, there are concerns related to the China market, as automotive production declined by 15% in the first half of the year. While overall sales in China declined by 13% sequentially, there are multiple factors at play, including: 

• OEM finished goods inventory is elevated. 
• New energy vehicle tax incentives, combed with OEM price reductions, are expected to increase sales volumes in the midterm. 
• Macroeconomic uncertainty will continue to impact buying behavior. 

In the industrial market, growth was driven by clean energy and automation. Design wins for the quarter leveraged sensor technology for DC charging, residential solar inverters, and energy storage applications.  

Overall, Allegro’s order backlog has come down, and lead times have fallen by about 30%, with most of them returning to standard industry norms. There are plans to further reduce lead times, especially for the company’s distribution channel and industrial customers. 

Within the next quarter, sales to distribution will be down slightly, while sales to OEMs should increase marginally. Sales for the quarter will be in the range of $270M to $280M. 

ON Semiconductor Corporation (onsemi) – July 31, 2023 

Key Takeaways:

• Revenue Was $2.09B, Above the Midpoint of Guidance. 
• Silicon Carbide Business is Supporting Long-Term Supply Agreements Totaling over $11B. 
• Energy Infrastructure Revenue Within the Industrial Business Segment Increased Nearly 70% YOY. 
• Q3 Revenue Will Be Around $2.09B to $2.19B. 

This was the first quarter where automotive revenue surpassed $1B, growing 8% QOQ and 35% YOY, driven by expanding electrification and the ongoing need for sensing in vehicles. Onsemi now has a 68% market share in ADAS, 27% market share in industrial, and maintains the number one position in the intelligent sensing market for automotive and industrial. The company is also number one in ultrasonic and inductive sensing for automotive and industrial. 

The new standard requirements for vehicles will require higher resolution image sensors, which onsemi produces. Onsemi consequently expects revenue for the company’s eight-megapixel image sensors to more than double YOY. 

Within silicon carbide revenue, there were several highlights, which included: 

• Onsemi is on track to achieve first $1B year and have more than 50% of substrates come from the companies own internal production by the end of Q4. 
• EV is the fastest growing part of this business, followed by energy infrastructure. 
• Signed over $3B of new silicon carbide LTSAs, bringing long-term supply agreements to over $11B. 

In the industrial market, revenue grew 5% YOY and 10% QOQ. The three divisions driving growth in this business includes energy infrastructure, factory automation, and EV charging. In particular, there was an accelerated adoption of high growth energy infrastructure applications like solar inverters, energy storage inverters and EV fast chargers. Overall, energy infrastructure revenue increased nearly 70% YOY. There was also additional strength in medical applications.  

Within onsemi’s “other” segment, 5G and cloud power grew at 22%. While most of onsemi’s emerging products in digital power supply are intended for the company’s primary markets, automotive and industrial, the servers will also be utilized by the AI industry.  

Monolithic Power Systems, Inc (MPS) – July 31, 2023 

Key Takeaways:

• $441.1M Total Q2 Revenue, 2.2% Lower QOQ, 4.3% Lower YOY. 
• Enterprise Data Revenue Up 1.7% QOQ Driven by AI Industry Demand. 
• Automotive Revenue Fell 71.1% YOY Due to Delayed Product Launches. 
• Order Patterns Are Fluctuating, Causing Reduced Visibility Beyond 90 Days. 

Overall sales and communications were lower QOQ for MPS despite increases in industrial, storage and computing, consumer, and enterprise data revenue. MPS previously called out that customer order patterns might fluctuate, which turned out to be correct. During Q2 there was an increase in order delays and push-out requests, which is complicating short-term visibility and making forecasting beyond Q3 2023 challenging. 

While some segments showed sequential revenue improvements, other segments saw revenue decline. By market, the results were as follows: 

• Storage and computing revenue was $124.5M, up 3.9% QOQ and 1.8% YOY. 
• Industrial revenue was $49.7M, up 4.8% QOQ and down 11.0% YOY. 
• Consumer revenue was $65.2M, up 2.9% QOQ and down 33% YOY. 
• Automotive revenue was $104.4M, down 0.9% QOQ and up 71.1% YOY. 
• Enterprise data revenue was $48M, up 1.7% QOQ and down 26.4% YOY. 

Storage and computing revenue increased after being bolstered by higher commercial notebook sales. The growth in this market led to this industry accounting for 28.2% of MPS total Q2 revenue, up from 26.5% YOY. 

Industrial revenue was supported by increased sales of products for power source and industrial meter applications. Despite the sequential increase, the market did falter on a YOY basis and consequently fell from 12.1% of MPS total revenue to 11.3%. 

The decline in communications revenue stemmed from lower infrastructure sales. Consequently, communications sales now represent 11.2%, down from 12.9% in Q2 of 2022. 

Consumer revenue improved sequentially following stronger gaming, TV, and mobile device sales. However, there was a YOY decline, which brought total sales down from 21.1% in Q2 of 2022 to 14.8%. The consumer business showed some improvement, especially in the U.S. and Asia, while other markets experienced delays and softer demand.  

Automotive revenue was lower than expected due to two product launches being delayed until Q4 and Q1 because of technical issues. The power isolation module is being resampled and is intended for use in both automotive and data center applications, with a focus on silicon carbides for sampling.  

Enterprise data revenue increased QOQ thanks to initial shipments of new generation AI applications, which offset softer demand for CPUs. AI is expected to continue driving demand for enterprise data products, and MPS plans to see multiple new customer applications launch within the next few quarters. 

Regarding GPU business, the company holds a leading position with a large customer and is deeply engaged in future designs. There have been rumors that Renesas may be brought in as an additional source, but MPS remains confident that their strategic partnership is strong, and a secondary component supplier will not undermine the relationship. This customer aims to take a leadership position through innovation and may consider multi-sourcing to allow competition in the market. 

MPS noted that their revenue and customer base has expanded tremendously over the last few years, particularly amongst Tier 1 accounts. MPS has become a designated preferred supplier with multiple Tier 1 customers in the automotive and telecom industries. In 2024 and 2025 the company hopes to grow these relationships and expand into additional industries via the following strategies: 

• Sampling silicon carbide power solutions for data centers and green energy conversion. 
• Developing EV power management applications. 
• Broadening AI customer base and expanding solutions for next-generation platforms. 
• Achieve design win for battery management solutions and USB-PD for automotive, industrial, and consumer applications. 

The company observed a meaningful decrease in channel inventories both in terms of dollars and days during Q2. They believe they are in a position to continue normalizing channel inventories over the next two quarters. For Q3, revenue will be in the range of $464M to $484M. Until visibility improves, MPS is hesitant to make too many forward-thinking statements about specific business segment performance.  

Hitachi, Ltd. – July 28, 2023 

Key Takeaways:

• Total Revenue Was $16.46B. 
• Railway System Revenue Grew 129% YOY Due to Progress in Major Projects. 
• Hitachi Energy Business is a Major Driver for Profitability and Grew 69% YOY With Over 31% Growth in ASEAN (Association of Southeast Asian Nations) and Over 47% in North American Markets. 
• Estimated Revenue for Next Quarter is $16.74B. 

Hitachi energy grew significantly and is a large driver for profitability. There was a stable expansion of orders, mainly within large-scale businesses. The breakdown was: 

• Digital systems and services revenue grew 11% YOY.
• Hitachi energy grew 69% YOY.
• Railway system revenue grew 149% YOY. 

Within the digital systems and services segment, revenue and profits increased. Some of the highlights for this market were as follows: 

• Front business increased steadily but was impacted by restrained investments in transportation and the electric power field. 
• IT service revenue expanded because of security, cloud-related services, and services for manufacturing and distribution.
• Services and platforms revenue declined because of lower sales in the overseas storage business. 

For Hitachi energy, the backlog of orders at the end of the quarter was significant, indicating strong demand moving forward. Nuclear energy and Hitachi power solutions profits decreased because of a decline in equity in earnings, offsetting the solid performance recorded in nuclear energy.  

Within Hitachi’s connective industry, profits increased thanks to expanding sales of digital solutions and products for industrial fields. The adjustment phase currently going on in the Chinese real estate market impacted building system revenue. Other major developments in the connective industry included: 

• Smart life and ecofriendly system revenue increased. 
• Measurement and analysis systems revenue decreased because of declining semiconductor equipment sales.
• Industrial Digital BU profits increased due to digital solutions and robotic SI business, as well as cost reductions.
• Water and environment BU revenue increased because of solid sales in air conditioning systems. 
  
  

Celestica – July 27, 2023 

Key Takeaways:

• Total Revenue was $1.94B, an Increase of 13% YOY. 
• Communications Revenue Declined 15% YOY. 
• Enterprise Revenue Increased 42% YOY. 
• AI Demand Drove CSS Revenue 5% Higher YOY and Caused Outlooks for 2023 to Increase Based on Strong Demand Forecasts for Hyperscaler Customers. 

Celestica’s two business segments, advanced technology solutions (ATS) and connectivity and cloud solutions (CCS), both increased this quarter. ATS revenue increased by 24% YOY and 9% sequentially. CCS revenue increased by 5% YOY and 3% sequentially. The breakdown of technologies in these groups is as follows: 

• ATS: Industrial, energy, medical, and capital equipment business.
• CCS: Communications and enterprise end markets (servers and storage). 

In Celestica’s ATS segment, the company saw double-digit YOY growth after ramping new green energy programs and the return of commercial aerospace demand. Celestica has also seen an improvement in operational efficiencies thanks to the material supply environment’s continued normalization. Some additional highlights for this business include: 

• Multiple new defense program ramps in 2023, and overall strength in the aerospace and defense industries as commercial aviation boosts demand. 
• HealthTech is experiencing solid double-digit YOY growth, driven by new applications for surgical instruments and imaging devices.  

For next quarter, ATS will increase in the low double-digit percentage range YOY. Growing demand in industrial, healthcare, and aerospace and defense business will be partially offset by continued market headwinds in capital equipment. Capital equipment remains muted due to lower demand in the wafer fab equipment market.  

In Celestica’s other business segment, CCS, there was solid growth in the hyperscale business as the company continued to invest in AI and machine learning. Some of the key developments within the hyperscaler market include: 

• AI is driving demand for more networking power, with GPUs and TPUs significantly increasing the need for bandwidth, and thus power usage, by more than 20x. This is generating pull through demand for core networking products, which Celestica has a commanding share of. 
• While the material environment has largely returned to pre-COVID levels, the AI industry has still run into extended lead times on several commodities. 
• Another key megatrend is the migration from 400G to 800G switches, which will enable higher speed networking equipment over the next couple of years. Celestica anticipates a broader adoption of 400G, which Celestica is a market leader for, and building 800G inventory volume.  
• AI is also driving demand for custom silicon, which has higher power usage and cooling requirements. Celestica is confident in its ability to produce these types of very complex products at scale, which is why this is a target area for long term demand. 

Over the last 90 days hyperscaler demand has continued to increase, which drove the successful results for Q2 and pushed Celestica to increase its outlook for the year. 

However, CSS revenue is expected to be flat YOY in the next quarter following headwinds from communications revenue, which declined by 15% YOY this quarter. The communications end market is expected to decline in the high single digit percentage range YOY, thanks to lower anticipated demand in networking, including in Celestica’s hardware platform services business. 

FLEX – July 26, 2023 

Key Takeaways:

• Total Revenue was $7.34B. 
• Automotive Revenue is on Track to Reach $4B. 
• Flex is Ramping Microinverter and EV Fast Charging Production in the U.S. to Support Vehicle Electrification Trends. 
• Weak Demand in the Consumer End Market Caused Agility Revenue to Decline 10% QOQ. 

Here is a breakdown of Flex’s agility market and its earnings for Q2: 

• Revenue was $3.6B, down 10% sequentially due to weakness in the consumer market. 
• The consumer industry remained soft because of higher interest rates, lingering post-COVID spending normalization, and slowing enterprise IT demand. 
• Revenue in the agility market is expected to be down in the range of mid-single to low-double-digits, with the weakness in the consumer end markets impacting both lifestyle and consumer devices. 

After growing 30% in 2022, the communications, enterprise, and cloud computing (CEC) markets saw challenging comparable sales after a year of hypergrowth. Despite this, did have some additional callouts for CEC market strengths: 

• There is more evidence of secular driven markets having demand, which is why Flex’s diversified portfolio is a benefit during challenging market conditions. 
• On the power side, Flex has developed embedded power products that also have benefits for industrial customers. 
• On the AI side in particular, Flex has a big platform ramp planned for a cloud customer in the second half of the year. The compute and power requirements for generative AI are highly intensive, which has led to changing technical requirements in the data center industry. 
• From a manufacturing perspective, these changing needs are creating new opportunities and driving some of Flex’s business. 

Another important secular trend is the proliferation of the global renewable energy transition.  Some noteworthy developments from this quarter were: 

• Flex’s automotive revenue is on its way to $4B, with a huge demand push from the vehicle electrification industry.  
• The company is ramping microinverter and EV fast charging production in the U.S., which are two examples of how Flex products are well positioned to enable the global shift to renewable energy.  
• In 2022 Flex’s renewable energy revenue was just over $1.2B within the larger $6.5B industrial business unit. Renewables are expected to grow again this year, with improving long-term prospects as the rules and benefits of the IRA are finalized. 

Intel Corporation – July 28, 2023 

Key Takeaways: 

• Q2 Revenue Was $12.9b, Over $900M Higher Than the Midpoint of Guidance. 
• Client Computing (Ccg) Revenue Increased 18% Sequentially. 
• Data Center and AI (DCAI) Revenue Was $4B, up 8% Sequentially. 

Foundry Services Increased by 4x YOY and Nearly Doubled Sequentially. 

Q2 results for Intel exceeded expectations despite the challenges of inventory correction, macroeconomic uncertainty, and a slower-than-anticipated recovery in China. The company's improved profitability was driven by the following: 

• Strength in client and data center markets.
• Cost savings opportunities contributing to more robust sales.
• Intel's foundry services (IFS) business increasing 4x YOY and doubling sequentially. 

There was a modest recovery in consumer and education segments, plus added strength in the premium segments. Thanks to close partnerships and communication with customers, Intel was able to bring client CPU inventory down to healthy levels. Concerning inventory, the sustained recovery will continue into the year's second half as overall supply levels begin to normalize.  

Here are the business results by unit: 

• Client Computing Group (CCG) revenue was $6.8B, up 18% quarter over quarter (QOQ) and ahead of expectations.
• Data Center and AI (DCAI) revenue was $4B, ahead of expectations and up 8% sequentially.
• Network and Edge (NEX) revenue was $1.4B, below expectations and down 38% sequentially.
• Mobileye's revenue was $454M and flat sequentially.
• Foundry Services revenue was $232M, up 4x YOY and doubling sequentially. 

While the average selling price declined modestly due to higher education shipments and sell-through of older inventory, the CCG business segment generated more than $500M sequentially higher revenue. The shipment increase offset the impact of the preparation for the second half of the launch for Meteor Lake. 

Within the DCAI business unit, FPGAs delivered a third consecutive quarter of record revenue, increasing 35% YOY. The strength in this market should continue, but demand will as customer backlog comes down. 

NEX revenue was bolstered by relatively stronger demand trends across broad-based markets like industrial, automotive, and infrastructure. However, elevated inventory levels and continued softness in the network and edge industries caused lower than expected revenue results and a 38% sequential decline.  

The robust increase in the foundry business was due to increased packaging revenue and higher sales of IMS nanofabrication tools. However, operating losses caused by higher factory startup costs offset this. Overall, the customer inventory burn has slowed, and the market is moving toward a better equilibrium. 

Xeon business increased by double digits sequentially, and Intel expects that the YOY declines within the DCAI market should diminish throughout the second half of 2023. However, there were some significant trends within the TAM market, both negative and positive, which had mixed effects on overall results. This included: 

• The faster-than-anticipated TAM recovery in China and across enterprise markets has delayed the return of CPU TAM market growth.
• Relatively stable CPU market share supported ramp up of Sapphire Rapids, which boosted average selling prices by 3% sequentially and 17% YOY. 

Q3 revenue will be between $12.9B and $13.9B. Data center, network, and edge markets will continue to feel the impact of mixed macro signals and elevated inventories. Meanwhile, IFS and Mobileye will generate strong sequential and YOY growth. Foundry services will help Intel capitalize on AI demand and create a diversified and resilient global supply chain. 

Samsung Electronics – July 27, 2023 

Key Takeaways: 

• Interest Rate Hikes and Inflation Majorly Impacted All Market Segments. 
• Growth Should Return in the Second Half of the Year for Consumer and Foundry Business. 
• Prices Declined for Dram and Nand by 5% To 9%, but Demand Is Expected to Continuously Increase. 

There were three major factors that impacted revenue this quarter, including: 

• Weak consumer sentiment resulting from inflation and high-interest ranges. 
• Slower than expected rebound in Chinese markets.
• Inventory corrections should slow going into the year's second half. 

Outside of demand for premium smartphones with low prices, sales in Samsung’s other business segments were sluggish and caused a delayed recovery for semiconductors. The consumer, display, and foundry markets all declined YOY. However, they did increase QOQ, which highlights that even with weak demand, there are some signs of improvement. Near-term inventory cycle issues will continue and have an impact on utilization, but in the long-term manufacturing capacity will be supported by the industry megatrends surrounding HPC, 5G, and AI-related demand. 

Despite a slight recovery in the device experience (DX) division, consolidated revenue fell by 5.9% sequentially. The following developments had the most considerable effect on overall DX division revenue: 

• Weak consumer product demand led to a decrease in smartphone shipments. 
• Lower utilization and slow demand resulted in declining system semiconductor profits.
• Sales of high-value-added products and reduced inventory valuation losses in memory caused an uptick in consolidated gross profits.
• Higher DRAM shipments thanks to AI-centric products like HBM and DDR5. 

Within the memory market, demand fluctuated based on the application. The biggest movements for Samsung’s subdivisions were generative AI driving server demand, price drops, and more stable inventory levels for DRAM and NAND. There were some additional stand-out developments in the DRAM and NAND markets. 

• DRAM exceeded growth guidance thanks to applications for consumer, graphic, and automotive markets. Plus, there was an added emphasis on server sales and rising demand for DDR5 and HBM. 
• NAND's cost competitiveness increased, especially concerning flagship smartphone products. There was also an uptick in sales for gaming devices within Q2. 

In the display market, mobile panel business results were similar to the DX division. Even with Q2 usually being a seasonally weaker quarter, sales were focused mainly on premium TVs and digital appliances, supported by improved cost structure and operational efficiency. Network business declined in North America and Japan. However, the digital appliances business improved profitability, bolstered by consumer audio demand for portable and KWS products.  

Global IT demand in the business environment will recover gradually in the year's second half. The hope is that there will be improved results for the component business, but ongoing macro risks and challenges associated with a demand recovery are also likely to persist, so while there is optimism surrounding a recovery, it is not guaranteed.  

For the second half of the year, the market will likely stabilize as customer inventory levels come down. The biggest trends moving forward will be: 

• Mobile panel businesses should deliver improved results thanks to the launch of new smartphone models, such as foldables and wearables. Additionally, there should be increased sales of premium TVs and digital appliances. 
• Supply within mobile and PC applications should normalize, and demand should improve with the launch of new smartphones and increased PC promotion.
• DRAM and NAND inventory peaked in May and has declined rapidly since, so there should be more stability moving forward. More extensive adjustments are planned for the NAND side of the business.
• Samsung focuses on supporting high-value-added products like DDR5, LPDDR5X, and HBM. However, the inventory adjustments for legacy memory products may cause some headwinds. 
  

Renesas Electronics Corp. – July 27, 2023 

Key Takeaways: 

• $2.65b Total Revenue for Q2. 
• Automotive Revenue Declined 2.7% YOY. 
• Industrial, infrastructure, and IoT Fell 12.3% YOY. 
• Days of Inventory Went Down, but Sales Channel Inventory Increased by 9 Weeks. 

The downturn in Renesas’ key markets was caused by a slow recovery for automotive production, heightened inventories, and increased costs for raw materials impacting gross margins. Revenue results were as follows: 

• Total revenue declined by 2.2% YOY but increased by 2.5% QOQ.
• Automotive revenue declined by 2.7% YOY and 1.1% QOQ.
• Industrial, infrastructure, and IoT fell by 12.3% YOY but increased by 2.5% QOQ. 

Industrial has been a strong market, but the continuous YOY growth will likely slow its pace. The increase in this market was primarily driven by demand for analog products, specifically timing ICs and timing devices. The market has likely bottomed in Q2 for PCs and consumers, so there should be modest improvements from Q3 onwards. In relation to data centers, it’s too early to state when demand will recover. But, the progression of DDR5 may result in a faster recovery than initially anticipated. 

For automotive, the results were less robust than initially anticipated. The enhanced growth of EVs and reduced demand for internal combustion engine vehicles has led to some uncertainty, especially among Japanese customers. Cash flow amongst large Tier 1 customers remains tight as companies try to control their inventory levels from Japan to China. 

Gross margins were 1.9 percentage points above forecast due to a rise in costs for product mix and raw materials and a decline in production. The reduction in utilization also led to a slower-than-expected recovery. However, there were bright spots for the industrial, infrastructure, and IoT markets regarding increasing R&D. 

The days of inventory (DOI) declined in Q2. Infrastructure DOI fell one day to 106, while automotive also saw a minimal decline. On the other hand, sales channel inventory, in relation to weeks of inventory, all increased QOQ. Overall, the weeks of inventory increased by about nine weeks overall. 

On-hand inventory is expected to continue its increase in Q3 due to the decline in long-term contract and utilization rates. In terms of inventory, Renesas hopes to: 

• Grow die bank inventory. 
• Decrease overall inventory. 
• Decrease finished product work.
• Increase work-in-progress production. 

Order backlog also increased this quarter, but the situation is relatively slow as Renesas still needs to work through the on-hand inventory accumulated so far this year. In addition, the departure from NCNR orders also added to the ample inventory. The company has determined that when orders come in, they come in based on actual demand and, therefore, a shorter period. Lead times are short, so this is not an issue, especially when combined with the ample inventory that Renesas already has available. 

Additionally, AI has yet to significantly impact business, but from Q3 onwards, there may be a slight implication for operations. In the immediate future, the AI effect will be most significant for memory and power architecture as customers shift to the next generation of technology.  

STMicroelectronics NV (STM) – July 27, 2023 

Key Takeaways: 

• Net Revenue of $4.33, YOY Increase of 12.7%. 
• Automotive and Discrete Business Increased By 34.4% YOY. 
• MCU and Digital IC Revenue Increased By 13%. 

STM leveraged a balanced end-market approach, diverse product portfolio, and strong customer relationships to achieve 12.7% YOY growth in Q2. This result was driven by growth in the automotive and industrial markets. Revenue by product group is as follows: 

• Automotive and Discrete Group (ADG) increased by 34.4%, accounting for 45% of revenue. 
• Microcontrollers and Digital ICs Group (MDG) increased by 13%, accounting for 33% of revenue. 
• Analog, MEMS, and Sensors (AMS) Group declined by 15.7% to account for 22% of revenue. 

ADG and MDG were expected to grow YOY, and ADG exceeded expectations by expanding significantly. ADG's double-digit expansion was largely due to the robust strength in the automotive market and demand for power discretes. MDG's growth was smaller but still above 10%, thanks to demand for microcontrollers (MCUs) and RF communications. 

The decline in the AMS market was the result of the following trends: 

• Lower revenue in personal electronics. 
• Ongoing inventory correction in the smartphone market.   
• Customer's transitioning from 4G to 5G devices. 
• A slower-than-expected recovery in China also affected the company's Integrated MEMS (IMS) division.  

The inventory correction impacting the supply chain caused STM's inventory level to reach 126 days. The remainder of the year's goal is to reduce inventory by 10 days. STM hopes to achieve this by reducing production in Q3 and Q4, especially at fabs more exposed to the weakness in the personal electronic and computing industries.  

Operating expenses (OpEx) were more than expected this quarter due to one-time charges and delayed grant funding. OpEx should decline in Q3 as those R&D grants materialize and overall costs decrease. Due to these factors, OpEx expenses will range from $880M to $890M. 

Three factors have driven the rise in demand within China for STM's silicon carbide devices: 

• Proliferation of electric vehicles and the trend towards car electrification. 
• Industrial power and energy applications. 
• A rising need for silicon carbide manufacturing. 

Because of this demand, STM has announced a joint venture with Sanan Optoelectronics to build high-volume 200mm silicon carbide device manufacturing in China, aiming to create a vertically integrated silicon carbide value chain for Chinese customers. This venture will start production in Q4 2025, with full build-out anticipated in 2028. 

In addition, STM is also pursuing GaN technology to address various markets. To that end, STM has three major projects in the works: 

• Implementing TSMC's GaN technology for fast chargers in the consumer market. 
• Developing STM's GaN MOSFET technology to address power and energy markets for inverters. 
• Playing a role in GaN-based radio frequency products and integrated GaN solutions combining BCD driver, controller, and GaN MOSFET. 

For Q3, revenue will be around $4.38B at the midpoint, with ADG division revenue expanding by over 20% YOY. MDG revenue will also grow, but only slightly, in Q3. Alternatively, the imaging, sensor, and MEMs division will decrease by 31% YOY. This ongoing weakness is primarily due to the lingering lack of demand in the personal electronics and computer verticals. Demand should gradually improve in Q4 and Q1 next year as the market works through excess inventory. 

SK Hynix – July 26, 2023 

Key Takeaways: 

• SK Hynix Revenue Increased 44% Sequentially. 
• DRAM Sales Expanded to Account For Over 20% Of SK Hynix Sales. 
• NAND Bit Shipment Grew by About 50% QOQ, and Average Selling Price Fell 10%. 

SK Hynix revenue was 44% higher sequentially thanks to expanded sales of premium products like high-density DDR5, high-performance LPDDR5 and HBM. Shipment volume and average selling prices increased. In particular: 

• DRAM bit shipment grew by mid-30%, bolstered by strong demand for high-end servers and inventory build demand from mobile and PC customers. 
• DDR4 prices declined, but overall DRAM sales went from just 10% of the company’s sales to over 20%. 
• HBM and high-density DDR5 module sales expanded significantly.
• NAND bit shipment grew by about 50% QOQ, and average selling price fell 10% 

The memory market has slowly started to recover in comparison to the beginning of the year. Driven by the AI demand trend, sales for high-density, high-performance memory, and AI servers increased. AI servers use at least double to 8x more memory compared to traditional servers, so the memory market will be largely supported by the AI industry moving forward. In addition to being bolstered by AI, memory product production cuts have helped memory inventories come down to more stable levels. 

Demand in the second half of the year is expected to increase, thanks to enterprise and gaming PCs. Smartphone demand is also anticipated to improve, as mobile demand in China was rather subdued. Additionally, the demand for high-density and high-performance LPDDR5 is expected to expand. Reduced IT spending, economic downturn, and inventory adjustments by CSP companies will continue to cause headwinds for the server market, but AI should offset some of these trends. 

While memory demand has seen minimal improvements, it is still deficient in relation to the elevated levels of inventory. It will still be some time before demand exceeds supply. Due to the overall weakness in the memory market, SK Hynix plans to further reduce NAND production. 

Seagate Technology Holdings – July 26, 2023 

Key Takeaways: 

• Q2 Revenue Was $1.6B. 
• Production Output Was Reduced by 25% To Improve Supply and Demand Imbalance. 
• Non-Hdd Revenue Dipped 15% Sequentially, but Long-Term Demand Should Be Supported by Trends in the AI Industry. 
• Legacy Business Increased 8% Sequentially, Thanks to Mission-Critical Product Demand. 

The macro end market conditions that led to a challenging business environment will continue throughout the fiscal year, which is why Seagate has implemented the following strategies: 

• Adjusting pricing to build long-term supply chain stability. 
• Implementing a build-to-order approach to manufacturing capacity. 
• Balancing lead times for mass capacity products with revamp production efforts.  

The pace of the economic recovery in China has been unpredictable, especially within the mass capacity markets. While sales are still well below historical levels, there has been increased demand within the VIA markets and specific regional cloud and enterprise OEM customers. However, forecasts indicate that sales will remain relatively stable throughout the rest of the year. The overall market highlights for Seagate were: 

• Legacy business increasing 8% sequentially, thanks to higher demand for mission-critical products. Client and consumer markets declined slightly because of seasonal trends. 
• Mass capacity results and demand dipped because of softness in the cloud nearline market but were buoyed by the strength within the VIA markets. 
• Non-HDD revenue dropped 15% sequentially because of lower enterprise system volume. 

Globally, nearline demand from enterprise OEM customers has remained soft. The pace of inventory absorption, especially amongst U.S. cloud customers, has slowed due to companies tightening operating budgets in response to the near-term macroeconomic uncertainty. Additionally, efforts to optimize existing workloads on-premise and in the cloud have helped enterprise customers and deferred mass storage deployments. 

Because of these factors, Seagate has reduced shipments to several large cloud customers to accelerate inventory absorption and protect financial returns, affecting near-line demand from enterprise OEM customers. 

While it will take a few more quarters to reach normal inventory levels, this process may be prolonged by shifting spending priorities as customers focus on accelerating the build-out of AI infrastructure. This development will likely delay the recovery of storage demand, but the following stages for AI will be long-term growth drivers for Seagate. 

• Phase One: Currently, customers are beginning to build and train AI models, which requires significant investments in compute architectures. 
• Phase Two: Creating enterprise-specific use cases that use AI models to convert data into value-enhancing applications. 
• Phase Three: Utilizing cost-effective mass storage will also build out long-term demand for HDDs as they remain five times more cost-effective compared to flash solutions. This makes HDDs the best option for data-intensive AI applications. 

Additionally, the ongoing migration of workloads to the cloud will coincide with these phases and continue to drive demand for Seagate products. These trends will influence the entertainment and consumer industries, plus there are further applications within the healthcare industry. 

For the upcoming quarter, Seagate expects minimal mass capacity improvements to offset legacy market declines. Non-HDD revenue for system business will dip sequentially. Seagate’s September quarter revenue will be $1.55B, plus or minus $150M. To support revenue, the company is focused on managing costs, optimizing manufacturing capacity, and being cautious about overbuilding to maintain financial performance. 

MaxLinear, Inc. – July 26, 2023 

Key Takeaways: 

• Q2 Revenue was $183.9M. 
• Infrastructure Business Grew 37% YOY. 
• Weak Demand Caused A Decline in Revenue for Broadband Access, Connectivity, and Industrial Multimarket.  
• Broadband Revenue Fell 62% YOY. 

This quarter's most significant highlight was MaxLinear's infrastructure business, driven by demand for 5G wireless backhaul. MaxLinear is well positioned to support the ongoing rollout of millimeter wave technologies, based on the company's design win momentum and partnerships with Tier 1 equipment suppliers. Overall, the results for Maxlinear's business segments were: 

• Infrastructure grew 6% sequentially and 37% YOY. 
• Broadband revenue fell 34% sequentially and 62% YOY. 
• Connectivity declined by 43% sequentially and 33% YOY. 
• Industrial and multimarket revenue dropped 20% sequentially and 11% YOY. 

Some headwinds for the rest of MaxLinear's business impacted the broadband access, connectivity, and industrial multimarket. The trends that led to a decline in revenue for all business segments, excluding infrastructure, included: 

• The cyclical downturn in the semiconductor market. 
• Customers managing excess inventories.
• A combination of near-term product, customer, and end-market mix impacted gross margin stability. 

MaxLinear is confident that the market will recover, and revenue will grow. AI continues to drive significant design win activity for 5-nanometer CMOS Keystone 800-gigabit optical PAM4 solution, adoption of 800-gigabit solutions, and a growing desire for a broader customer supplier base. Thanks to the design win activity and ongoing customer pipeline, MaxLinear intends to ship small volumes of the industry's first 5-nanometer CMOS 400-gigabit and 800-gigabit PAM4 DSP production-ready silicon towards the end of 2023. 

MaxLinear will be focusing on innovation and execution within infrastructure moving forward. The demand for Wi-Fi, fiber broadband access gateways, and wireless infrastructure will help support further growth, with some of the most significant opportunities in optical and wireless infrastructure. Part of the strategy for this market entails the following: 

• New products for optical data centers, enterprise switches, and storage accelerators. 
• Maintaining momentum in Wi-Fi, PON, storage products, and Ethernet solutions. 

However, the inventory burn that affected Q2 results may continue into the first half of next year, depending on demand recovery. Q3 revenue will range from $125M to $155M. The continued rationalization of product inventory with direct and channel customers will result in all four end markets declining quarter-over-quarter. While a minimal recovery may materialize in Q4, visibility is limited, and forecasts remain cautious. 

Silicon Laboratories Inc. – July 26, 2023 

Key Takeaways: 

• YOY Decline of 7%.
• Q2 Total Revenue $245M.
• 14% European Market Revenue Increase.
• Design Win Pipeline Growth of 23% YOY.
• Anticipated Q3 Revenue of $190M to $210M.

Silicon Laboratories experienced market erosion and weak demand that had an impact on both its Home and Life (H&L) business, as well as its Industrial and Commercial (I&C) business. For the company’s H&L business, sales and revenue were lower due to customers still navigating higher inventory levels. However, despite market slowdown, the I&C business unit showed resilience and achieved record quarterly revenue thanks to strength in segments like connected equipment, commercial and retail space, electronic shelf labels, and smart metering. 

• Home and life business declined by 33% to $80M.  
• Industrial and commercial business revenue increased by 15% YOY to $165M. 

The dynamic market environment made it difficult to determine the extent to which production ramps in the second half of the year would offset market headwinds.  

• Silicon Laboratories' revenue for Q2 was $245M, down 7% year-over-year (YOY). 
• By region, European market revenue increased by 14% while APAC and Americas saw declines. 
• Stronger shipments to direct customers caused a decrease in distribution but still accounted for 77% of Q2 revenue. 
• Net inventory increased by $12M this quarter to $146M. 

Silicon Laboratories has an expanding opportunity funnel, which stood at over $18B, representing a 17% increase over the same time last year. The company saw additional growth in its design win pipeline with an increase of 23% YOY in the first half of 2023. The company continued to expand its Series 2 product portfolio, which is capturing market share, and mentioned a forthcoming Series 3 platform, representing a significant leap forward for IoT (Internet of Things).  

Bookings were low this quarter as customers continued to digest excess inventory. Silicon Laboratories expects the ongoing weakness in demand to be global, with a broad-based slowdown across customers, segments, and geographies. The upside of the current market is shorter order lead times, but the downside is the reduced visibility and limited customer confidence in the current demand as the booking patterns continue to be impacted.  

Due to this weakness, Q3 revenue guidance is in the range of $190M to $210M, with both business segments expected to decline. 

Teradyne Inc. – July 27, 2023 

Key Takeaways: 

• Q2 Total Revenue $684.44M.
• Memory Test Market Sales Increased by 49% Verses Q2 2023.
• Automotive Demand Stayed Strong Within SOC Test.
• Anticipated Q3 Revenue of $650M to $710M.

The Q2 results were at the top of Teradyne Inc.’s earnings guidance, thanks to improved gross margins, a resilient memory test market, and increased system-on-chip (SOC) test market revenue, resulting in $684.44M total revenue in Q2. The stronger results were partially offset by robotics demand being softer than expected and challenges related to the supply of specific components, mainly in the analog and linear logic areas.  

Overall, the test business performed better than expected, which will likely continue based on this quarter’s numbers (listed below), and market trends that favor a majority of Teradyne’s business segments: 

• System test revenue was $94M, with $38M in storage test. 
• Robotics revenue was $72M.
• Semiconductor test revenue was $475M.
• Wireless test revenue was $44M. 

Diving deeper into each segment: 

Within the SOC test segment, the total addressable market for automotive will grow more rapidly than the rest of the SOC market. This forecast is supported by the fact that demand from the automotive market within the SOC test segment pushed revenue $300M higher than April outlooks previously stated. EV and hybrid demand, along with broader adoption of ADAS, cabin lighting, and infotainment, as well as the high-test intensity required for automotive quality requirements, will drive this momentum. 

The tester market performed well for the wireless and system tests business, but demand was muted and consistent with the outlook discussed in April. For wireless and system tests, there is a similarly complex roadmap driving business, laying a solid foundation for the projected expansion. 

Robotics was weaker than Teradyne had forecasted since demand dropped over the last three months due to worsening economic trends impacting manufacturing. For the robotics market, demand has significantly softened thanks to economic conditions and low PMIs in Europe and the U.S. Lead times are now under five weeks. Despite the softness of this market, demand is strong for human-scale automation projects. Lead generation from automation trade shows set a new record this quarter, but customers are still reluctant to place orders in the short term. 

For semiconductor testers in particular, an ongoing excess inventory correction cycle has persisted for the past four quarters, with the mobility part of the market taking the hardest hit. The hypergrowth expected in the semiconductor test market remains unchanged as 3-nanometer has already begun to ramp up, with 2-nanometer and gate all around scheduled to ramp up soon. 

The memory test market segment stayed true to April outlooks, with NAND, DDR5, and high bandwidth memory (HBM) DRAM contributing strong results. These devices are being used for data center applications and are leading retooling efforts. Memory test sales went up 49% versus Q2 last year thanks to the technology driven buys of customers within the semiconductor test market segment.

Looking ahead to the next quarter, Teradyne anticipates the memory test market revenue will be at the low end of $900M. This market has felt the effects of AI demand, especially within the HBM DRAM segment, as more robust test demand for Magnum products should continue until the end of 2023. Historically, the HBM market share of the memory industry has been minimal. Still, it is expanding rapidly and will shift from less than 5% of the test market in 2022 to somewhere between 10% to 15% this year. The robust nature of this market is offset by weaker capacity buys, particularly in Flash for mobile applications. Despite the downturn going on at the moment, the demand for increasing device complexity has exponential potential as the industry applications are varied. Cloud and edge AI applications like ADAS systems, spatial computing, and privacy-focused consumer applications are all demand-driving factors. 

For the companies that deal in cloud computing, cloud AI, and edge AI, there has been an uptick in efforts to differentiate solutions via control of chip design. These efforts began a few years ago and are now starting to emerge in data centers and vehicles.  

The VIP portion of the compute segment will likely expand faster than the overall compute segment. Within the advanced packaging market, stack dye has been more broadly adopted for high bandwidth memory and chiplets for processors.  

Looking ahead, Q3 sales will range from $650M to $710M. For the rest of the year, the SOC test market will be between $3.7B and $4.1B. Automotive segment strength will continue to offset the ongoing weakness in the mobility market. In addition, the AI industries-enabled cloud computing applications will drive test demand for compute and networking. 

United Microelectronics Co. – July 26, 2023 

Key Takeaways: 

• Q2 Total Revenue $56.3B.
• Sequential Increase of 3.8%.
• 27.8% Operation Margin Increase.
• Q3 Wafer Shipments Will Decline by Approximately 3% to 4%.

United Microelectronics Co (UMC) has been able to efficiently generate profit through its core operations, contributing to the total Q2 revenue of TWD 56.3B. The operating profit margin increased by 27.8%, while expenses toward operations were flat. UMC’s improvement to its product mix, mainly in the 12-inch portfolio, created a higher average selling price, resulting in a sequential increase of 3.8%. 

Here is a breakdown of the contributing product mix based on processing technology: 

• 22/28 nanometer comprised about 29% of total foundry segment sales. 
• 65-nanometer was 23% of sales. 
• 40-nanometer was 12%. 
• 90-nanometer was 10%. 
• 011/0.13um was 10%.
• 0.15/0.18um was 9%.
• 0.23/0.35um was five percent.
• Technology under 0.5um was 2%. 

The numbers by region: 

• 56% of total revenue from Asia.
• 27% of total revenue from North America.
• 12% of total revenue from Europe.
• Five percent of total revenue from Japan. 

The numbers by application: 

• Communication accounted for 44% of total revenue.
• Computer revenue accounted for 9% of total revenue.
• There was a short-term recovery in demand for the consumer space as sales increased for Wi-Fi, digital TV, and display driver ICs.
• Computer-related product demand moderately rebounded from the quarter prior and made up about 9% of sales. 

The outlook for wafer demand is uncertain for the upcoming quarter, likely due to the longer-than-expected inventory correction still affecting the electronic component supply chain. While there was a limited recovery in Q2, overall end-market demand remains weak. However, 22/28-nanometer technology business will maintain resilience thanks to the newly ramped capacity in UMC's P6 in the Tainan Fab. 

This strength is thanks to UMC's leading position in edge specialty technologies, like embedded high voltage, contributing to stable demand for advanced nodes. In addition, UMC is gearing up to create the necessary silicon interposer technology and capacity to fulfill emerging AI market demand from customers. This new offering indicates that the company is focused on addressing new market opportunities in the AI and advanced computing space. 

Overall, wafer shipments will drop by about three to four percent next quarter. The average selling price for UMC is expected to increase by about 2%, as rising costs may erode gross margins, and capacity utilization remains cautious as production levels work to align with demand. 

Texas Instruments Incorporated – July 25, 2023 

Key Takeaways: 

• YOY Decline of 13%.
• Q2 Total Revenue $684.44M.
• Sequential Increase of 3%.
• Operation Profit Decreased by 28%.
• Anticipated Q3 Revenue of $4.36B to $4.74B.

Texas Instruments (TI) saw an overall decrease in revenue in Q2 due to the continued weakness across most markets, except automotive. The weakness in industrial, communications equipment, and enterprise systems speaks to the challenges of low demand for TI products. Revenue declined 13% year-over-year (YOY) and three percent sequentially to $4.5B.  

Here is a breakdown of the Q2 revenue stream: 

• Operating profits fell by 28% as operating expenses increased by 12% compared to last year. 
• Analog business declined by 18%. 
• Embedded processing increased by 9%. 
• ‘Other’ markets declined by 10% YOY. 
• Automotive increased by 20% YOY.
• Industrial was flat.
• Personal electronics was low, single digits.
• Communication decreased in the mid-teen range.
• Enterprise dropped to the mid-single range. 

Gross profit margins decreased by 540 basis points YOY due to lower revenue and increased capital expenditures (CapEx). This suggests that TI is struggling to maintain healthy profit margins as it is focusing on supporting expansion during a time of low demand. The increase in CapEx is intended to support revenue growth for the next 10 to 15 years. This funding will build more internal manufacturing capacity, increasing inventory levels. Unfortunately, at the moment, there is much uncertainty around forecasting and production planning as orders continue to drop due to customers working through inflated inventories. 

Because of these challenges, Q3 revenue will likely range from $4.36B to $4.74B. All markets, except for automotive, are expected to stay flat or decline. In addition, after three consecutive quarters of increasing cancellations and pushouts, cancellations remain at elevated levels and don’t show significant signs of decline. Despite the mixed results and questions on management strategy, TI intends to see the CapEx investment approach through and not cut production or utilization rates until those investments can begin to generate returns. 

NXP Semiconductor – July 24, 2023 

Key Takeaways: 

• Q2 Total Revenue $3.3B .
• YOY Automotive Segment Increase of 9%.
• Anticipated Q3 Revenue of $3.4B.

NXP’s revenue was at the high end of guidance for the quarter, totaling $3.3B. Trends in all end market segments performed better than expected, and NXP has maintained distribution channel inventory at a 1.6-month level. The company also had more substantial gross margins, offset by higher R&D investments to support mid and long-term growth targets. 

Here are the numbers by end market: 

• Automotive revenue was a YOY increase of 9% with a total of $1.87B. 
• Communication, infrastructure, and others increased by 15% yearly to total $571M.
• Industrial and IoT declined by 19% to total $578M.
• Mobile was down 27% to total $284M. 

Despite the mixed results, all end-segment revenue was at the high end of guidance. 

The automotive and core industrial businesses have been concentrated this year, with only minor areas of supply shortages predicted to linger through the end of the year. Strong seasonal trends have been recorded in the mobile segment, particularly in the premium portion of the market, which is on track to continue in Q3. Demand for the communications and infrastructure segment has been soft for cellular base station markets. However, the overall results from the first half of 2023, combined with guidance for Q3, show that NXP is successfully managing its business through the cyclical downturn in consumer exports. This is primarily due to the strength in automotive, core industrial, and communications infrastructure markets.  

Additionally, there is still some instability stemming from a supply issue impacting European tier 1s in the automotive sector. NXP reported a problem in Q1 revolving around excess issues with golden screw components, which affected pockets of inventory. Compared to the supply challenges over the last several years, this is moderately minor volatility as lead times and order patterns have essentially returned to normal levels. However, this situation has resulted in strict inventory targets and a more extensive conversation amongst OEMs, automotive OEMs, and automotive Tier 1s on how much stock each partner should hold.  

For Q3, revenue is anticipated to be $3.4B, a decline of about 1% YOY and a sequential growth of around three percent at the midpoint. 

Here is the anticipated revenue stream from NXP for Q3 based on forecasted market trends:  

• Automotive will likely increase within the mid-single-digit percentage range as demand is healthy but not showing major signs of significantly increasing. 
• Communication, infrastructure, and others will likely increase by 10% year over year and be flattish sequentially. 
• Industrial, IoT, and mobile devices are forecasted to decline in the mid-teen percentage range.  

Should a strong rebound in demand emerge, NXP is confident that it has enough on-hand inventory to satisfy an uptick in orders. This certainty is supported by the fact that the company continues investing in its production capacity. However, the higher input costs are not hitting the company’s gross margins and are being passed on to the consumer, which could cause demand to waver if customers turn to the open market or alternative sources to secure cost savings opportunities. NXP is highly focused on collaboration with suppliers and customers to create long-term supply availability and maintain demand, especially for the automotive and core industrial end market segments. 

Taiwan Semiconductor Manufacturing Co. – July 20, 2023 

Key Takeaways: 

• Sequential Decline of 6.2%.
• Q2 Total Revenue $48B.
• Sequential Increase of 3%.
• Operation Profit Decreased by 28%.
• Anticipated Q3 Revenue of $4.36B to $4.74B.

Taiwan Semiconductor Manufacturing Co.’s (TSMC) total revenue for the quarter was $48B, a decline of 6.2% sequentially due to global economic uncertainty and customer inventory adjustments influencing demand. Despite the market downturn, TSMC remains dedicated to investing in R&D to support N3 and N2 development. Furthermore, TSMC’s strongest markets this quarter were automotive and digital consumer electronics (DCE), with DCE seeing the most prominent increase in sales at 25%. 

Here is the revenue by technology: 

• 5-nanometer process technology accounted for 30% of wafer revenue. 
• 7-nanometer was 23% of wafer revenue. 
• Advanced technologies, those under 7-nanometer, were 53% of wafer revenue.  

Here is the revenue each segment contributed to TSMC’s total revenue stream in Q2: 

• High-performance computing (HPC) declined by five percent sequentially to account for 44% of Q2 revenue.
• IoT decreased by 11% to account for 8% of total revenue.
• Smartphones declined by 9% to a total of 33%.
• Automotive increased by three percent to account for 8% of total revenue.
• Digital consumer electronics increased by 25% to account for 3% of total revenue. 

Global economic uncertainty, customer inventory adjustments, and the ramp-up of N3 and overseas fab expansion contributed to the gross margin challenges for the year. Stricter cost control and improved foreign exchange rates partially offset lower capacity utilization and higher electricity costs. However, gross margins still decreased by a little over two percentage points sequentially. Despite the boom in AI-related applications, the overall cyclicality of the semiconductor industry did impact TSMC's business. 

Even with the decline in revenue and demand for HPC and smartphone platform, the earnings from these markets will support the ramp-up for the N3, which will occur throughout the rest of the year. As part of the N2-technology platform, TSMC also developed N2 with a backside power rail solution, which is best suited for HPC applications. In addition, N2-watt performance and power benefits are well-positioned to fulfill the industry's need for energy-efficient computing. Backside power rail, which provides ten to 12% added speed and ten to 15% larger density boost on top of baseline tech, will hopefully be available in the second half of 2025.  

However, there have been staffing challenges that are complicating production timelines and expansion projects. Skilled workers with the necessary experience in equipment installation in a semiconductor-grade facility are hard to find. Despite sending Taiwan technicians to train local skilled workers, the manufacturing schedule for N4 process technology has been delayed until 2025. 

Three-nanometer technologies will support Q3 revenue, even with headwinds from ongoing inventory corrections. Despite some challenging market conditions, the industry megatrend of 5G and HPC continues to drive demand for performance and energy-efficient computing, which in turn is increasing the need for leading-edge technologies. While the impact of AI-related applications has not been able to outweigh the industry's recurring trends of fluctuating demand, AI will lead the need for technology and support TSMC's long-term growth. Because of this, TSMC's HPC platform will likely be the main engine and most prominent contributor to growth in the next several years. 

ASML Holding – July 19, 2023 

Key Takeaways: 

• Total Net Income of €1.9B for Q2.
• Bookings Increased to Create a Backlog of €38B.
• Memory Market Sales Increased by 10% Sequentially.
• Chinese Market Increased Demand for Tools at Mature and Mid-Critical Nodes.
• Delayed Fab Readiness Reduced Growth Forecasts for 2023 by 15%.

ASML reported net sales at the higher end of guidance, equaling €6.9B, and total net revenue for Q2 of €1.9B. Overall, ASML’s bookings increased this quarter to create a backlog of about €38B. ASML shipped 12 EUV systems, with net system sales driven by the logic and memory markets. The logic market accounted for 84% of sales, and the memory market accounted for the remaining 16%. Memory market bookings increased from 21% in Q1 to 31% in Q2, indicating that leading memory makers are undergoing technology transitions and leading retooling efforts. Installed base management sales were €1.3B as guided. 

EUV and deep UV (DUV) demand visibility have been unpredictable this quarter, as the timing of customers’ order placement has deviated from normal patterns. The fluctuations in timing are primarily due to the following factors: 

• Delayed fab readiness. 
• Macroeconomic uncertainty. 
• Recovering supply chain logistics.
• Overinflated inventories leading to more moderate wafer output. 

Despite these variations, DUV supply remains limited and unable to meet demand. 

The Chinese market has closed any gaps in DUV demand via orders for tools at mature and mid-critical nodes. ASML is applying for export licenses with the Dutch government to permit continued shipments of advanced immersion DUV lithography machines. Restrictions have already had an impact on business, which is why most of the business in China is largely dedicated to mature and mid-critical nodes. Mature and mid-critical nodes have numerous applications for different industries, including: 

• Transitioning to cleaner energy and products. 
• IoT in the industrial industry.
• Increasing telecommunications infrastructure and battery technology.  

With China leading mid-critical and mature semiconductor production for the semiconductors utilized by these markets, it is also increasing competition in this space. Both China and its competitors will require ASML products to expand fabs, which will support revenue for ASML in the short term and down the road via maintenance revenue. 

ASML plans to ship 375 DUV systems with a mix of over 25% immersion. The new fast shipment process for immersion systems will allow the company to recognize sales revenue upon shipment, as customers have agreed to reduce the acceptance test procedure that was initially required. This will increase ASML's revenue by about €700M in 2023 and reduce the delayed revenue for the year. As a result, the total expected year-over-year (YOY) growth for non-EUV business has gone from last quarter's total of about 30% to 50%. 

Lingering supply chain issues and delays in fabs coming online are still causing headwinds for EUV sales. ASML expects to ship about 52 EUV systems this year, equaling YOY growth of 25% versus the expected 40%.  

Current utilization rates, market uncertainty, and customers delaying productivity and performance upgrades have impacted ASML's installed base business. Growth for this market segment will only be about five percent this year due to the impact of these trends. 

Looking ahead, net sales for the upcoming quarter will be about 30% versus the previously stated over 25%. Q3 net sales will be between €6.5B and €7B. Installed base management sales will be around €1.4B. Additionally, the economic recovery predicted for the second half of 2023 has become a moving target that will likely wait till 2024 to materialize fully. However, 2024 is still looking strong for ASML due to its extensive backlog and firm product demand. With lead times currently in the range of 12 to 18 months, ASML doesn’t plan to reduce capacity in 2024 because of the forecasted demand coming from new fabs in the next year and stretching into 2025. 

While ASML is hesitant to make forward-thinking statements, the 2025 outlook is also shaping up to be substantial due to the ramp-up of some significantly advanced fabs in the logic space. However, this demand will depend on 2024 and the macroeconomic situation, as there is still some uncertainty around whether or not those fabs will place orders right away.