Outside of one major chip company and one or two end-markets, earnings season has mostly yielded good news from chip suppliers.
Intel (INTC) , as many readers probably know, saw another post-earnings plunge after reporting major near-term pressures for its server CPU division amid both tougher competition from AMD (AMD) and soft enterprise server demand. And there have also been some other firms, such as Seagate (STX) and Texas Instruments (TXN) , that have reported seeing weak demand from enterprise hardware clients.
But otherwise, the disclosures and commentary shared by chip suppliers over the last three weeks has been pretty favorable. Here’s a quick recap:
- Firms such as TI, Intel, STMicroelectronics (STM) and NXP Semiconductors (NXPI) have reported major Q3 rebounds for their automotive chip sales, thanks to both the end of production halts and improving consumer car demand.
- Intel, AMD, TI, Western Digital (WDC) and others have indicated PC demand remains healthy, with weak corporate desktop demand more than offset by strong notebook demand from consumers and education-market buyers.
- Companies such as Taiwan Semiconductor (TSM) , Samsung, NXP and STMicro have forecast mobile chip demand will remain strong in Q4. Along with Apple’s (AAPL) iPhone 12 launches, new Chinese 5G phone launches and rebounding consumer demand have been mentioned as growth drivers.
- There’s also broader strength being reported in the consumer electronics space. Gaming hardware continues flying off the shelves, and companies such as TI and Samsung have reported seeing healthy demand for products such as tablets, TV sets and smart home devices.
- Demand for “industrial” chips — often used by companies as a catch-all term that covers chips going into factories, airplanes, home appliances, medical equipment and various other things — is on the whole improving, with firms reporting higher Chinese demand and strength in end-markets such as medical devices, home appliances and building automation.
- Following strong first-half demand, demand from cloud giants looks softer right now, as companies digest the capacity they recently built up. But Intel, AMD, Samsung and Western Digital all signaled that cloud demand will be strong next year, with Samsung suggesting pending Intel and AMD server CPU launches will provide a boost.
It’s also hard to ignore how chip M&A activity has flared up again, with September’s Nvidia-Arm deal having been followed up this week by AMD’s deal to buy Xilinx (XLNX) and Marvell’s (MRVL) deal to buy Inphi (IPHI) .
Higher stock prices are clearly making firms more willing to use their shares as currency for acquisitions, and perhaps also making targeted companies more willing to sell. Also, it’s possible that some companies are wagering that U.S.-Chinese trade tensions — and with them, the odds of a deal failing to get Chinese regulatory approval — will thaw under a Biden administration, should it arrive.
As is the case for various other sectors, macro headwinds are still a risk for the chip industry, particularly at a time when colder weather is arriving and COVID-19 cases are rising in both the U.S. and Europe. And with many chip buyers carrying elevated inventories due to supply chain and/or geopolitical concerns, there is some risk of wider inventory corrections happening in seasonally weak Q1.
But right now, business is still trending in the right direction for many chip suppliers — and not just because of work-from-home trends.
Get an email alert each time I write an article for Real Money. Click the “+Follow” next to my byline to this article.