The automotive industry is weak, NXP Semiconductors' third-quarter revenue guidance is not good, and it fell more than 8% after hours | Financial Report

Dutch semiconductor chip designer and manufacturer NXP Semiconductors' revenue in the last quarter met expectations, but the degree of revenue decline in this quarter exceeded expectations, highlighting the impact of the company's core business being affected by the slowdown in demand from the automotive industry and increased geopolitical risks.

On Monday, July 22, after the US stock market closed, NXP Semiconductors' US stocks listed on the Nasdaq plummeted after the company's financial report was released. The stock price was originally up about 5.4% on Monday, but fell more than 8% after hours.

NXP Semiconductors announced in its financial report that for the second quarter of this year ending in June, the company's revenue was $3.13 billion, a year-on-year decrease of 5.2%, roughly in line with analysts' expectations. The revenue in the first quarter increased by nearly 0.2% year-on-year. The non-GAAP diluted earnings per share for the quarter were $3.20, a year-on-year decrease of 6.7% and a quarter-on-quarter decrease of 1.2%, also in line with expectations.

On a non-GAAP basis, NXP Semiconductors' gross profit for the second quarter was $1.833 billion, a 5% decrease year-on-year, with a gross margin of 58.6%, slightly higher than the 58.4% in the same period last year. Operating profit was $1.071 billion, a 7.3% decrease year-on-year, with an operating profit margin of 34.3%, lower than the 35.0% in the second quarter of last year.

Looking at the business segments, NXP Semiconductors' largest revenue source, the automotive business, had revenue of $1.728 billion in the second quarter, a 7.4% decrease year-on-year, much larger than the 1.3% decline in the first quarter, reflecting the soft situation in the automotive industry.

In terms of performance guidance, NXP Semiconductors expects, on a non-GAAP basis, revenue for the third quarter to be between $3.15 billion and $3.35 billion, with a midpoint of $3.25 billion, while analysts expect the high end of the guidance range to be $3.35 billion. Based on this guidance, NXP Semiconductors' revenue in the third quarter may accelerate its decline, with the maximum year-on-year decline approaching 8.2% and the minimum decline exceeding 2.3%.

On a GAAP basis, diluted earnings per share (EPS) for the third quarter are expected to be between $2.60 and $3.01, with zero growth or a 13.6% decline year-on-year, all below analysts' expectations of $3.09.

On a non-GAAP basis, NXP Semiconductors expects adjusted operating profit for the third quarter to be between $1.077 billion and $1.277 billion, with a midpoint of $1.141 billion, also below analysts' expectations of $1.17 billion.

On a non-GAAP basis, NXP Semiconductors expects the adjusted gross margin for the third quarter to be between 58% and 59%, with a midpoint in line with analysts' expectations of 58.5% NXP Semiconductors CEO Kurt Sievers stated after releasing the financial report that, based on the company's performance in the second quarter and guidance for the third quarter, NXP has successfully passed through the cyclical trough of the business, and we expect to resume quarter-on-quarter growth.

Some have questioned Sievers' statement, expressing doubts about the growth story of NXP. What lies behind this cyclical trough that Sievers mentioned? How will they maintain their momentum?

In the second quarter, NXP continued to strengthen its automotive ecosystem. At the NXP Automotive Ecosystem Technology Summit held in China in May, NXP revealed that it is accelerating the construction of the automotive ecosystem in China, collaborating with various parties to drive future automotive innovation.

NXP has established an Automotive Electronic Application Technology Development Center in China to proactively conduct technology research and development around the needs of Chinese customers. In addition, following the establishment of an Artificial Intelligence Application Innovation Center in Tianjin, NXP also launched the Artificial Intelligence Innovation Practice Platform Cloud Lab in April this year. The latter is the world's first fully online laboratory for NXP Semiconductors.

According to the plan, NXP will leverage the Cloud Lab to help Chinese customers and partners, especially small and medium-sized enterprise customers, discover growth momentum, accelerating their product development and innovation outcomes with global resources, forward-looking perspectives, and system-level thinking.

In June, NXP announced a collaboration with the German automotive parts company ZF Friedrichshafen AG (ZF) to jointly develop the next-generation SiC traction inverter solution for electric vehicles (EVs). ZF will adopt NXP's advanced GD316x high-voltage isolated gate driver to accelerate the adoption of 800-V and SiC power devices in the next generation of pure electric vehicles.

Also in June, NXP and Vanguard International Semiconductor Corp. announced plans to establish a joint manufacturing company, VisionPower Semiconductor Manufacturing Company Pte Ltd (VSMC), which will build a 300-nanometer semiconductor wafer production plant in Singapore. The joint factory will support 130-nanometer to 40-nanometer mixed-signal, power management, and analog products for the automotive, industrial, consumer, and mobile terminal markets. NXP plans for the joint venture to obtain underlying industrial technology licensed by TSMC