Semiconductor giants are sounding the alarm on soft China demand. Here's what they're saying

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Semiconductor giants are sounding the alarm on soft China demand. Here's what they're saying

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Nvidia CEO Jensen Huang

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China's slowdown is becoming a real headache for US semiconductors, prompting them to warn investors about soft sales in the country.

On Monday, the chipmaker Nvidia slashed its fourth-quarter sales guidance, citing significantly weaker economic conditions in China and disappointing sales of its gaming and datacenter platforms.

Nvidia follows Intel, Texas Instruments, Lam Research, and TE Connectivity in blame slumping sales on a slowdown in China.

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.

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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 $250 billion Chinese goods, promoting China to retaliate on a smaller scale. Trump, in September, threatened to impose tariffs on another $267 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:

Get the latest Intel stock price here.

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Intel

Intel

Ticker: INTL

Performance in the past 12 months: -7%

"Fourth-quarter revenue of $18.7 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.

Swan added: "In October, we provided a preview of our outlook for 2019. At the time, we described a combination of tailwinds and headwinds that were balanced. The tailwinds were an expanded and growing TAM, product momentum, and business mix. The headwinds were tougher compares following an especially strong 2018, increasingly competitive environment and global trade. Since that time, trade and macro concerns, especially in China, have intensified."

Source: Bloomberg

Texas Instruments

Texas Instruments

Ticker: TXN

Performance in the past 12 months: -8%

"On a regional basis, demand in China was weaker than the other regions. End markets within China, though, behaved directionally consistent with the rest of the world," said David Pahl, head of Texas Instrument's investor relations.

"We are seeing signs from our customers and the channel that this weakness is primarily from increased caution due to trade tensions."

Source: Bloomberg

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TE Connectivity

TE Connectivity

Ticket: TEL

Performance in the past 12 months: -24%

"During the first quarter, our order trends were below our expectations due to weaker global auto production and lower order levels in China in our Transportation and Communications segments," said CEO Terrence R. Curtin.

"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%."

Source: Bloomberg

Lam Research

Lam Research

Ticker: LRCX

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.

"You may recall on the September call, I spoke about how strong that was and it declined somewhat in December."

Source: Bloomberg

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Nvidia

Nvidia

Ticker: NVDA

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."

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