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.
From the Source’s Mouth is updated throughout the quarter. The table below summarizes key takeaways from Q3 earnings calls, which began on October 18th and runs through December 8th, 2023.
Q3 was a significant quarter for AI product development, as AMD achieved multiple milestones for AI hardware and software road maps.
Results by segment were as follows:
Other market highlights were as follows.
On the hardware side of AMD’s business, the MI300A and MI300X accelerators are progressing and exceeding expectations performance-wise. Production shipments of Instinct MI300A APUs started earlier this month. Shipments of the Instinct MI300x GPU accelerators to lead cloud and OEM customers will begin before year-end.
On the software side, AMD further expanded its AI software ecosystem. Based on the progress made with AI roadmap execution and commitments from cloud customers, AMD expects Data Center GPU revenue to be approximately $400 million in the fourth quarter and exceed $2 billion in 2024 as revenue ramps up throughout the year.
Revenue for Q4 will be $6.1B, up 9% YOY and 5% QOQ. A few notes on the outlook for Q4 and 2024:
Overall, the memory market somewhat recovered sequentially this quarter. Samsung stated the following regarding the general health of this segment.
Samsung’s S.LSI business, the company’s only fables division focused on next-generation semiconductor solutions, had sluggish demand due to economic downturn and inflation. Similar results were also recorded in Samsung’s foundry business. Notes on developments in this market:
Display Company saw a QOQ increase after an uptick in seasonal demand and new products launched by major smartphone makers.
Meanwhile, in the DS division, PC and mobile are expected to improve as customer inventories have normalized.
Packaging is also seeing an increase in attention as multiple domestic and overseas HPC customers have submitted more orders, including requests for one-stop turnkey services encompassing logic, HBM, and 2.5D interposer. Mass production and further expansion for these products is expected to begin in 2024.
The outlook for Q4 is as follows:
Onsemi’s expansion in silicon carbide (SiC) boosted results this quarter as three of the companies’ factories had record output in Q3. Commentary on SiC included:
In addition to onsemi’s success in SiC, the company is the #1 in automotive image sensors and in industrial scanning. Design activity for this quarter has surpassed all of 2022, which will be a long-term driver for profits as 40% of image sensing revenue comes from new products.
Similar to onsemi’s broad-based competition, the industrial end market has seen more weakness over the last quarter. However, onsemi noted a few strengths unique to its product portfolio.
On the topic of inventory digestion, Tier 1s in Europe are still struggling with excess supply. This is driven by end-user demand and high inflation rates. On the SiC side of the business, outlooks for 2024 forecast that revenue will be flat or slightly down.
Despite macroeconomic challenges this quarter, revenue in the communications and computing market increased 6% sequentially. A few notes on this end market:
In industrial and automotive, revenue declined 5% sequentially but did increase 28% YOY.
Lattice is in the midst of its largest product portfolio expansion in its history. Some of the newest devices include:
Forecasts for next quarter are leaning towards the following trends:
Wolfspeed announced that they would sell their RF business, making them the only pure-play vertically integrated silicon carbide (SiC) company in the world. Some additional highlights from Q3:
Based on Q3 results, Wolfspeed expects to be the top SiC device supplier for years to come, as it will take some time for the competition to reach the company’s level of scale and product mix.
A few notes on Wolfspeed’s business outlook:
Following patterns set out in previous quarters, overall customer ordering patterns remained inconsistent as requests to delay deliveries persisted. As it stands, end customers are unwilling to commit beyond a certain window and expect lead times under 10 weeks for delivery. This situation continues to make forecasting beyond the next quarter a challenge due to the lack of short-term visibility.
By end market, MPS recorded the following:
While MPS does not usually provide outlooks by end market, the company did note that most will experience weakness in demand outside of the boost coming from AI. Automotive may not see much change, but due to the inconsistencies in ADAS business, this is subject to change.
Q4 revenue will be in the range of $442M - $462M.
Declining profit in Connective Industries due to semiconductor-related customer investment restraints was offset by increased profits in Digital Systems and Services, as well as Green Energy and Mobility. Overall, all of Hitachi’s business segments saw improved results this quarter.
In Digital Systems and Services, revenue was 7% higher YOY thanks to strong demand in Front Business, IT Services, Services and Platforms, and GlobalLogic. Regarding business dynamics:
Green Energy and Mobility expanded by 30% YOY, with orders rising by 31%. Nuclear Energy, Hitachi Energy, and Railways System profits all increased, with Hitachi Energy Expanding 35% and Railway Systems expanding 29%.
Connective Industries’ revenue rose 1% YOY, mainly based off of sales in Building Systems and digital solutions and products in industrial markets. For the entire business division, orders increased by 4%. A note on the individual performance of the segments in this business:
Since China is Hitachi’s main market for Building Systems, there are some concerns that revenue will be impacted by declining demand. In Hitachi’s other verticals, the company expects to see improvements through year-end.
Seagate’s earnings results were impacted by softer demand than anticipated in legacy markets this quarter, along with the ongoing cloud inventory correction and weak economic trends in China. These developments resulted in constrained short-term demand for hard drives.
Commentary on the Q3 landscape, moving into Q4 expectations:
With respect to the movements in the cloud market, activity is beginning to show signs of picking up.
Revenue for the next quarter is expected to be $1.55B. Seagate anticipates the following.
Aerospace and defense had the best performance this quarter. Revenue increased by 20% YOY thanks to commercial aerospace defense programs ramping up and improvements in supply availability.
The results for Benchmark’s other market segments were as follows:
Due to current market conditions, customers in certain verticals are moderating forecasts for Q4 and early 2024. Some notes on demand trends by sector:
Q3 results were at the midpoint of STM’s business outlook range. The results by product group were:
STM continues to expand its offerings, with production starting for the company’s new gallium nitride transistors, which simplify the design of high-efficiency power commercial systems. Other initiatives this past quarter included:
Guidance for Q4 indicates that net revenue will grow about 7.3% YOY, but the industrial end market in Asia had a lower level of orders at the end of Q3 than expected. This translated to less backlog for Q4, so revenue is subject to change depending on how STM’s end markets perform.
Order lead times shrank this quarter alongside channel inventory. Due an uptick in short-term orders, Renesas plans to increase inventory levels to capture those opportunities. A few notes on inventory by end market and channel QOQ:
For finished products, Renesas is reportedly shipping based on demand, which was lower than expected in Q3.
Renesas said the following regarding automotive:
Additionally, DDR5 demand has fueled robust growth in cloud-related products. Customers are still digesting DDR4 inventories, but overall, cloud data center growth is expected to continue. For the PC market, the overall trend is pointing towards recovery, but this will be affected by seasonality and may not hold.
Revenue for all of Intel’s major lines of business exceeded expectations:
Intel continues to plan for new AI products and applications, stating that Xeon’s strength will support moderate sequential growth for DCAI.
FPGA business underwent a period of rapid growth and tight supply this year. However, this market is now entering a cycle of inventory burn -- so demand will be lower.
Key operational milestones for the quarter:
Q4 revenue is projected to be between $14.6B - $15.6B.
Overall, Flex manages six markets, but the company is shifting its priorities to focus on next gen mobility, cloud, and digital health. Within the Cloud market, Flex noted:
Expansion in the cloud market was offset by the pressures in communication, enterprise IT, and consumer markets. Related to these segments, Flex noted:
For the next six months, Flex foresees next-gen mobility, cloud, and health solutions as the strongest markets. While the automotive industry has delivered strong results, but there may still be an impact from the on-going automotive strike in the U.S. Flex is consequently cautious in regard to overall growth for automotive.
Q3 revenue was at the high end of the guidance provided in Q2, with both of the company’s most prominent segments increasing YOY. However, advanced technology solutions (ATS) also experienced helpful tailwinds from new program ramps and robust aerospace demand.
By segment, Celestica recorded the following results:
Some key developments:
Within the HPS segment, revenue should increase due to robust network demand as some of Celestica’s hyperscalers have begun increasing their networking gear orders. Further notes on demand:
When asked about macro-conditions impacting the greater industry, Celestica stated that the company is not feeling the effects of those conditions due to the following reasons.
Celestica did report some headwinds:
Q3 sales were at the high end of guidance, with robotics exceeding expectations despite supply constraints. Compute, automotive and industrial analog segments are expected to in comparison to 2022. Meanwhile, the weakest segment of the system on chip (SoC) test market is mobility. In memory test, high-speed DRAM demand remains high.
By segment, Teradyne saw the following results:
Within Teradyne’s System Test Group, defense and automotive will increase 10% YOY. However, other segments in this group were impacted by over-supply in HDD and softness in Mobility.
Lead times continue to decrease as a result of supply and demand coming into balance. This trend will materialize further in Q4, but Q1 is when the company expects to see the lowest lead times and more book-ship variability.
In terms of market recovery, Teradyne stated:
Results this quarter were driven by strength in Computing and Communication. By end market, LCD controllers, Wi-Fi, Codec, and Touch IC controllers propelled Computing. Shipments in Communication also increased, thanks to demand for RF front-end IC and networking chips. A few additional notes on demand:
Subsequently, the Chinese PC Chinese segment will be flat. Expect a higher-than-expected inventory buildup for automotive, which is leading forecasts to expect a decline in revenue in Q4.
The Q3 results and Q4 outlook reflect the ongoing channel inventory correction.
A few notes on the infrastructure market.
In high-speed optical data center interconnect, the ongoing adoption of AI for cloud applications is driving design win activity. MXL made the following comments related to AI.
Some highlights for the connectivity market:
Within the broadband market, the near-term demand environment is challenging, but long-term outlooks are solid as the industry will be migrating from legacy DSL and older PON technologies to 10-gigabit PON fiber access. Commentary surrounding forward thinking statements:
Due to increased inventory, Texas Instruments (TI) lowered factory starts this quarter. This decision impacted the quarterly outlook because of additional charges added to the company’s income statement. By market, TI saw the following results:
Shifting forecasts and pervasive oversupply challenges resulted in TI slowing down fab starts and chip production this past quarter. However, TI is confident that they can navigate the situation as the vast majority of their 80,000 products sell to a wide range of customers. This diversity, combined with a long shelf life, is why they are comfortable holding higher inventory levels -- they believe it will move quickly once demand rebounds across different customer bases.
Now that TI is carrying larger inventory levels, lead times are coming down and normalizing compared to the years prior. There are still pockets of hot spots where lead times are longer, but the company’s flexible manufacturing plans will ease pressure on these products.
On a regional basis, Chinese market demand remained weak, including in the industrial market where there were expectations of a rebound. The only region that saw an increase was Japan.
TI stated that the company continues to operate in a weak environment in general, so results will be flat QOQ. However, despite the weakness in demand, TI will not adjust production capacity, as they expect a turnaround in Q4 or early 2024.
A higher capacity utilization rate and more favorable exchange rate pushed gross margins higher, although these strong results were offset by the initial ramp-up of TSMC’s 3-nanometer technology. This ramp-up will support the growth of the semiconductor industry in the future, despite customers remaining cautious in inventory control at the moment. The fabless semiconductor industry has continuously reduced its inventory this quarter, but persistent macroeconomic concerns and slow recovery in China have remained an issue. TSMC’s revenue breakdown by technology this quarter:
Overall revenue was broken down into five major categories:
While AI-related demand continued to be strong, it was not strong enough to offset the overall cyclicality of TSMC’s business. However, TSMC still believes that HPC will be its most robust market and growth contributor over the next several years. TSMC has also identified the consumer industry, mainly smartphone, as the second largest segment of their business.
The decline in the automotive market was driven by the industry entering inventory adjustment mode in the second half of the year. However, activity should pick back up again in 2024 thanks to electric vehicles and the implementation of more functionality.
In terms of expansion, TSMC continues to widen its global footprint. Highlights:
ASML's two primary business segments, EUV and DUV sales, were driven by Logic customers, who accounted for 80% of net system bookings. For the EUV side of the business, ASML had the following updates:
For DUV updates, ASML stated:
Concerning China, ASML is complying with the latest U.S. export control regulations. There may be a mid to long-term impact on the regional split of ASML's business.
ASML's remaining business segment, the installed base, had slightly lower results. Tailwinds were the result of market uncertainty and lower utilization rates. Revenue in the installed base business will consequently decline by about 5% YOY for 2023. Some of the key factors that will drive future success for ASML:
2025 is expected to be a significant year of growth. In addition, existing fabs will add capacity, aided by the continued recovery cycle. ASML's predictions included: