A couple of lesser-known chip companies and a battery maker have confirmed growing fears among investors about the slowdown in electric-vehicle and overall auto sales, which appears likely to continue into next year.
Monday was loaded with bad news from companies that make industrial chips for the auto industry, as earnings reports from On Semiconductor Corp.
in the morning and Lattice Semiconductor Inc.
in the afternoon disappointed Wall Street with their forecasts.
If inflation and high interest rates continue into next year, which is feasible, the slump in auto sales is expected to continue.
“We think it will carry through into the first part of next year, with most cycles running six to nine months,” said David Williams, an analyst with Benchmark who had predicted that the outlook for On Semi would have to be tempered. “However, the reduced consumer buying power and overall macro backdrop will likely keep buyers on the sidelines for the next couple of quarters.”
On Semi said that because of the shortfall in an order from one unnamed automotive customer in Europe, it now expects to ship $200 million less this year of its silicon carbide chips, which are used in EVs. The company did not give further details on its customer, but pointed out that at $800 million, its 2023 revenue will still be four times higher than 2022.
Last year, On Semi touted a new plant in Hudson, N.H., to make chips out of silicon carbide, an energy-efficient semiconductor material made of silicon and carbon, and predicted those chips would exceed $1 billion in sales in 2023.
“EVs are going to grow,” On Semi Chief Executive Hassane El-Khoury said Monday. “They’re going to grow for us in the fourth quarter as well. It’s just not going to grow in the fourth quarter at the rate that we expected… I think EVs are a long-term growth opportunity — even with the backdrop of a lot of the headlines that we’re seeing, customer designs have not slowed down.”
Even as company executives spun the positives, investors were rattled and On’s shares tumbled nearly 22%. Lattice Semiconductor also disappointed Wall Street with its outlook for the fourth quarter. Lattice sells chips that are used in advanced driver-assistance systems in cars, and shares tumbled 13% in extended trading after its fourth-quarter outlook came in lower than expected, due to fewer customers in Asia.
“In the last kind of four to six weeks of Q3, we started to see demand soften from our industrial and automotive customers,” Lattice CEO Jim Anderson told analysts. “I would say that it was really localized to the Asia geography, and we expect that softness we started to see at the end of Q3 extend into the current quarter.”
In addition, Tesla Inc.’s battery partner, Panasonic Holdings
of Japan, said it was slashing its production by 60% due to slower sales of some modelsto Tesla. That fueled a 4.8% drop in Tesla stock
to its lowest close since late May. Investors have been nervous about the EV market, especially after Ford
executives said last week that consumers were unwilling right now to pay a premium for EVs.
Semiconductor companies are often harbingers of future end-product demand in a wide variety of industries. Now that automakers use so many semiconductors, they can also be a big indicator of auto demand, especially in the hot arena of EVs. And those indicators don’t look good in the short term.