In a recent release, Analog Devices, Inc. (ADI), a leading international analog chip manufacturer, disclosed their financial results for the first quarter of the fiscal year 2025 (covering November 2024 to January 2025). The report indicated a considerable dip in both revenue and net profit, with total earnings reaching $2.4 billion, marking a 4% decrease compared to the same period last yearSimilarly, net profits fell to $400 million, reflecting an 18% decline year-over-year.

Delving deeper into their revenue structure, it becomes evident that the industrial sector remains ADI's largest revenue contributorHowever, this particular business segment faced challenges as customers continued to adjust their inventory levels, resulting in a quarterly revenue of $1.1 billion, which was a 10% drop compared to the prior yearThe automotive sector followed closely, accounting for $700 million but experiencing a modest 2% decrease in revenueMeanwhile, the communications segment generated $300 million, down 4% from last yearOn a brighter note, the consumer sector emerged as the only area with revenue growth, exceeding $300 million and increasing by 19%. ADI attributes this rise in the consumer segment primarily to an expanding market share within its operational scope.

This trend of declining financial performance is not unique to ADI; similar reports have emerged from various international analog chip companies, including Texas Instruments, Infineon, STMicroelectronics, NXP Semiconductors, and Renesas Electronics, all of which revealed downward trends in both revenue and net profitInfineon, for example, reported quarterly revenue of $4.4 billion, remaining approximately stable compared to the previous year, but experienced a significant shift from profit to loss, posting a shortfall of $90 millionRenesas Electronics showed marked vulnerability with a Q4 revenue of nearly $1.9 billion, dropping 27% year-on-yearAdditionally, STMicroelectronics reported a revenue exceeding $3.3 billion for Q4, demonstrating a 22% decrease, while NXP's Q4 revenue of $3.1 billion reflected a 9% decline, accompanied by a similar downturn in net profit

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Texas Instruments, often regarded as a bellwether for the semiconductor market, has reported a continuous revenue drop for nine consecutive quarters.

Since the latter half of 2022, the global semiconductor industry has been facing a downturnAs a primary supplier in the analog chip market, ADI has not been immune to the negative ramifications of this macroeconomic environmentAn industry insider shed light on the consolidation of financial downturns across international firms, indicating that the overarching theme is a general decline in market demand, with many companies engaged in a prolonged phase of inventory destocking throughout 2024. Specific markets such as automotive, industrial, and renewable energy continue to grapple with significant inventory challenges, directly affecting revenue, which are key contributors to the income streams of analog chip manufacturersInfineon’s recent financial updates echoed this sentiment as they revealed that customers in automotive and renewable energy sectors are still adjusting their inventories, leading to declines in revenue in these critical areas.

Contrastingly, the Chinese market is emerging as a vital growth driver for these analog chip firms, particularly highlighted in the booming automotive sectorMultiple executives from the companies reviewed indicated that buoyant demand from the Chinese automotive market has successfully mitigated some of the poor performances noted in other regionsADI’s CEO, Vincent Roche, pointed out that the company is witnessing growth across various markets within China, with the automotive business demonstrating particularly robust expansionHe noted that ADI has engaged in long-term collaborations with numerous Chinese automotive brands to supply a diverse range of analog chip products, including ADCs and power management chips.

The outlook for a significant recovery in 2025 remains a matter of contention among industry analystsSome, including ADI’s CEO, express an optimistic perspective, anticipating a notable rebound in demand that could stimulate growth across the entire analog chip market

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Liu Huanyu, a researcher from Guolian Securities, remarked, “From the overall sales data within the industry, it appears that the semiconductor cycle is transitioning from a forced inventory reduction strategy to a more proactive destocking approach, spurred by gradually increasing demand, with some segments even witnessing semiconductor companies beginning to replenish their inventory.”

However, there are diverse opinions concerning the anticipated demand recovery in 2025. The CEO of STMicroelectronics expressed a rather cautious outlook during a recent earnings forecast, indicating that the market still faces a delayed demand recovery, particularly in the automotive and industrial segments, especially in EuropeTrendForce analyst Qiao An previously noted that the overall conditions in 2025 are likely to resemble those in 2024, asserting that demand for non-AI products remains weakShe projected that even in 2025, market demand would still struggle to meet the production capacities of these semiconductor companies, and prices may continue to experience modest declines.

In addition to biding their time for market demand to rebound, these international analog chip manufacturers are actively implementing various growth strategiesSeveral European companies, including STMicroelectronics and Infineon, have introduced “China for China” strategies, which focus on localizing production to better serve domestic clientsMoreover, the integration of AI technology into analog chips has gained momentum, exemplified by NXP's incorporation of NPU processors within MCUs to enhance the performance of edge AI devices.

Zhao Zhanxiang, a partner and CTO at Yunxiu Capital, pointed out that domestic analog chip companies such as Shengbang Co., Aiwai Electronics, and Sirui Pu are strengthening their competitive positions, which could exert pressure on the operations of these international firms within ChinaFurthermore, the efforts to integrate AI into analog chips are still in their initial stages, highlighting the complexities of adapting to an evolving technological landscape.

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