(Reuters) – NXP Semiconductors Corp forecast third-quarter revenue on Monday that missed analysts’ estimates as the company grapples with sluggish demand from automotive customers and growing geopolitical risks, sending its shares down about 8 percent in extended trading.
The company posted its worst quarterly revenue drop in four years in the second quarter and its auto sales fell to their biggest decline in more than three years, according to LSEG data.
The Dutch company expects revenue of between $3.15 billion and $3.35 billion, compared with analysts’ average estimate of $3.36 billion.
Automotive customers – NXP’s largest segment – have cut orders due to weak demand as customers await an improving macroeconomic environment and interest rate cuts by global central banks.
Automotive revenue fell 7% to $1.73 billion in the second quarter, while total revenue of $3.13 billion was in line with estimates.
Chipmakers are also assessing the impact of China’s strained trade relations with the United States and the European Union.
With export restrictions tightening, Chinese companies have invested heavily in expanding production of older chips, known as legacy chips, Reuters reported earlier in July.
Increased market competition could hurt NXP’s sales in China, the largest contributor to its revenue in 2023, accounting for approximately 33% of total annual revenue.
The decline in the automotive segment offset growth in the company’s mobile segment. The division posted a 21% rise in revenue to $345 million as artificial intelligence upgrades fueled a rebound in demand from the smartphone sector.
The company forecast adjusted earnings with a midpoint of $3.42 per share for the third quarter, missing estimates of $3.61.
NXP has made significant investments to diversify its manufacturing base beyond China, investing $1.6 billion for a 40% stake in a joint venture with TSMC-backed Vanguard to produce silicon wafers in Singapore.
(Reporting by Arsheeya Bajwa in Bengaluru; Editing by Sriraj Kalluvila)
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