Last week, Microchip Technology Inc.’s president and CEO, Steve Sanghi, had some harrowing words on the state of the semiconductor industry saying another correction had already begun and a decline in revenue in the fourth quarter was expected.
Sanghi’s words sounded the alarm among investors and set off the stock market to rapid declines that have carried over to this week. But according to IHS Technology, a minor decline in revenue was already expected not only in the fourth quarter of this year, but in the first quarter of 2015 as well.
“We have been stating that the third quarter would be the high point in terms of quarterly revenue growth in 2014,” said Len Jelinek, senior director of semiconductor manufacturing at IHS. “However, we do not feel as if the sky is falling and the industry is about to crash.”
Historically, revenue for chip suppliers in the fourth quarter are weaker than other quarters during the year, Jelinek said. During the second and third quarter of this year, demand increased in order to support next-generation products. In the fourth quarter, historically, most companies see demand slow as the supply chain adjusts for inventory and takes a “wait and see” approach to what consumers will purchase during the holiday season, he added.
Earlier this year, IHS forecasted fourth quarter semiconductor revenue would decline to 1.2 percent growth, compared to third quarter revenue growth of 5.9 percent. “We anticipate further revenue declines in the first quarter of 2015 down -4.7 percent before rebounding in the second quarter,” Jelinek said.
As far as Microchip’s guidance on seeing lower revenue in the fourth quarter, Jelinek said that typically products sold to consumers in the holiday season are smartphones, tablets and PCs, markets in which Microchip’s main product, 8-bit MCUs, have little demand in.