NXP Semiconductor delivers mixed results as mobile and IoT chip demand falters

Shares of NXP Semiconductor N.V. fell in extended trading today after the chipmaker delivered mixed quarterly results and guidance for the first quarter of fiscal 2023 that came in below expectations.

The company reported a net income for the fourth quarter of $602 million, with earnings before certain costs such as stock compensation coming to $2.76 per share, just shy of Wall Street’s forecast of $2.77 per share. Revenue for the period rose 19%, to $3.31 billion, beating the $3.3 billion consensus estimate by a whisker.

NXP President and Chief Executive Kurt Sievers (pictured) said in a statement that while the company’s automotive chip business has “performed very well” over the last year, its consumer internet of things and mobile chipmaking units were hit by a “softening demand environment” in the second half of 2022.

“We have adopted a vigilant operational stance, aiming to improve service to those customers who continue to experience material shortages while managing the distribution-channel inventory levels well below our long-term targets,” the CEO added.

NXP sells a wide portfolio of computer chips to customers in multiple industries. The company is best known for its automotive semiconductors that power everything from car infotainment systems to tire pressure monitoring systems and vehicle-to-vehicle communications. In addition, NXP sells chips for identification, wired and wireless infrastructure, lighting, consumer, mobile and computing applications.

Wall Street investors have grown nervous about the semiconductor industry in recent months, with larger players like Intel Corp. and Nvidia Corp. reporting significant demand struggles and growing inventories. However, auto-focused chipmakers like NXP have managed to avoid the worst of the downturn.

The continued demand for automotive chips was evident in NXP’s breakdown of its sales, as that business unit accounted for more than half of its overall revenue in the quarter. The automotive segment delivered $1.8 billion in sales, up 17% from a year earlier.

However, it was a much grimmer picture in NXP’s other business segments. For instance, the Industrial and IoT segment reported revenue of $605 million, down 15%, while sales of mobile chips were flat at $408 million. NXP’s “communications, infrastructure and other” segment suffered a 5% drop, with revenue of $494 million.

For the first quarter of fiscal 2023, NXP is forecasting earnings of between $2.82 and $3.22 per share on revenue of $2.9 billion to $3.1 billion, lower than Wall Street’s guidance of $3.14 per share in earnings and $3.17 billion in revenue.

Holger Mueller of Constellation Research Inc. told SiliconANGLE that NXP has been a notable standout in the chipmaking sector, growing its full-year revenue by about 10% while the majority of its rivals have seen sales fall off a cliff. “The question is whether or not NXP can keep this up,” Mueller said. “Most likely NXP is going to be heading downwards in the not-too-distant future.”

Investors may be inclined to feel the same way. NXP’s stock fell more than 3% in late trading on the report, having declined just over a percentage point in the regular session on a down day for the overall market.

Photo: NXP Semiconductor