How Chip Demand Looks for Smartphones, PCs, Cars and Other Major End-Markets

Chip suppliers have reported seeing strong demand from notebook and server OEMs, and major order declines from automotive clients.
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With the COVID-19 pandemic leading demand for certain products to jump and others to plummet, some chip suppliers are doing much better than others right now.

Here’s a look at what chip developers have shared so far this earnings season about demand within various end-markets.

Smartphones

Smartphone sales have been hit hard by the shuttering of retail stores (including carrier stores) and broader consumer spending weakness. As a result, it hasn’t been surprising to see companies such as Taiwan Semiconductor  (TSM) - Get Report, Texas Instruments  (TXN) - Get Report and STMicroelectronics  (STM) - Get Report disclose that their smartphone-related sales are slumping.

Reducing the damage for some mobile chip suppliers: Sales of 5G phones, which tend to require a lot more RF chip content than their 4G counterparts, are holding up relatively well amid strong Chinese sales. With processor/modem share gains and its fast-growing RF chip business providing a lift, Qualcomm  (QCOM) - Get Report guided for its chip division (QCT) to see annual revenue growth in the June quarter, even as it guided for its patent-licensing division (QTL) to see a major decline due to an expected 30% drop in smartphone unit sales.

PCs

This is a clear bright spot for now, as notebook sales get a healthy boost from purchases made to support remote work and learning. Intel reported that its notebook processor sales rose 22% annually in Q1, and companies such as AMD  (AMD) - Get Report and Western Digital  (WDC) - Get Report have also reported seeing strong demand from notebook OEMs. At the same time, Intel and AMD did note that weaker consumer spending (due to macro headwinds) could weigh on second-half PC demand.

Desktop sales, a large portion of which normally involve systems going into corporate offices, have been weaker than notebook sales. But notebooks have long accounted for a solid majority of PC shipments.

Data Center Hardware

Cloud server spending was already growing heading into 2020, and it has received a fresh boost from purchases made by Internet/cloud giants to support usage spikes for a number of apps and services. Intel  (INTC) - Get Report, AMD  (AMD) - Get Report, Samsung, Western Digital  (WDC) - Get Report and several other firms have mentioned that sales of chips and (in Western’s case) hard drives meant for cloud servers are up strongly.

For the moment, sales of products going into traditional enterprise servers are also doing well -- Intel’s server CPU division saw its enterprise and government-related sales rise 34% in Q1. But Intel did caution that it expects these sales to weaken in the second half of 2020. Inventory-building among OEMs worried about supply chain disruption could be boosting near-term sales.

Automotive

With many auto plants shuttered and a lot of auto dealerships closed as well, it’s not surprising that chip companies have been reporting that their automotive sales are falling sharply. NXP Semiconductors  (NXPI) - Get Report, the world’s biggest auto chip supplier, guided for its automotive sales to be down about 30% annually in Q2.

STMicro did forecast its automotive sales would improve in the second half of 2020, following a rough Q2. However, the company still expects car production will be down 15% to 25% for the whole of 2020.

Mobile Infrastructure

While large 5G network investments in China and elsewhere could boost demand later this year, for the moment sales of chips going into base stations and other mobile infrastructure equipment remain under pressure.

Xilinx  (XLNX) - Get Report reported that its Wired and Wireless Group, whose sales depend heavily on the mobile infrastructure market, saw revenue drop 19% sequentially and 46% annually in its March quarter. The company did add that its mobile infrastructure sales would see some sequential improvement this quarter.

NXP reported that its “Communications Infrastructure & Other” segment, which also gets a lot of revenue from mobile base stations, saw revenue drop 10% annually in Q1, and guided for the segment’s Q2 sales to be down by a mid-teens percentage.

Cree  (CREE) - Get Report mentioned that its RF transistor sales for 5G base stations “continue to be impacted by ongoing delays in infrastructure rollouts.” But it added that it’s “encouraged to see early indications of improving demand.”