- Nvidia slashed its fourth-quarter sales guidance Monday morning, citing significantly weaker economic conditions in China.
- So far this earnings season, semiconductors Intel,Texas Instruments, Lam Research, and TE Connectivity, have all blamed slumping sales on a slowdown in China.
- Last quarter, China’s GDP growth grew at its weakest pace in a decade.
- President Donald Trump’s trade war also added headwinds for the semiconductor industry, which relies heavily on the manufacturing steps in multiple geographic regions, an analyst says.
China’s slowdown is becoming a real headache for US semiconductors, prompting them to warn investors about soft sales in the country.
During the fourth quarter, China’s economy grew at a 6.8% year-over-year clip, its weakest pace in at least a decade. And in December, China’s private-manufacturing sector contracted for the first time in 19 months as industrial profits posted their second consecutive monthly drop.
President Donald Trump’s trade war has added uncertainty for companies seeking to do business in the US and China. So far, the US has imposed tariffs on $US250 billion Chinese goods, promoting China to retaliate on a smaller scale. Trump, in September, threatened to impose tariffs on another $US267 billion worth of Chinese imports, but later agreed to delay them until at least the end of February. The two sides will hold meetings on Wednesday and Thursday in Washington as part of their latest round of trade talks.
The semiconductor industry, which relies heavily on the manufacturing steps in multiple geographic regions, needs the world’s two largest economies to maintain a good relationship, William Stein, an analyst at Sunset Robinson Humphrey said in December.
Here’s what the semiconductors are saying about soft China demand during their recent earnings call:
Performance in the past 12 months: -7%
“Fourth-quarter revenue of $US18.7 billion was up 9%, but short of our expectations as a result of a dramatically weakening modem demand, lower overall growth in China, cloud service providers absorbing capacity, and a weakening NAND pricing environment,” CFO Robert Holmes Swan told investors.
Performance in the past 12 months: -8%
“We are seeing signs from our customers and the channel that this weakness is primarily from increased caution due to trade tensions.”
Performance in the past 12 months: -24%
“Our overall orders in the first quarter were down 4% sequentially and on a year-over-year basis, total orders were down 6% with China orders declining over 20%.”
Performance in the past 12 months:-16%
“The foundry segment declined quarter-over-quarter accounting for 13% of system revenue, mainly due to reduced China foundry investments,” CFO Douglas R. Bettinger said.
Performance in the past 12 months:-44%
“Q4 was an extraordinary, unusually turbulent, and disappointing quarter,” CEO Jensen Huang said in a filing.
“As we worked through Q4, the global economy decelerated sharply, particularly in China, affecting consumer demand for NVIDIA gaming GPUs. Also, with initial shipments of new high-end RTX GPUs selling above MSRP, some customers may have delayed their purchase while waiting for lower price points and further demonstrations of RTX technology in actual game.”