Earnings Report Preview | The automotive chip industry remains weak, NXP Semiconductors' performance may be under pressure

According to Zhitong Finance, NXP Semiconductors (NXPI.US) will announce its third-quarter 2024 results after the U.S. stock market closes on Monday. Zacks data shows that analysts expect third-quarter revenue to be between $3.15 billion and $3.35 billion, with a consensus estimate of $3.25 billion, representing a year-on-year decline of 5.3%. The expected non-GAAP earnings per share for the third quarter are between $3.21 and $3.63, with a consensus estimate of $3.43, reflecting a year-on-year decline of 7.3%, and this expectation has remained unchanged over the past 60 days. Key Focus Areas NXP's third-quarter performance may benefit from strong momentum in the industrial and Internet of Things (IoT) sectors, driven by demand from China and the Asia-Pacific region, with robust demand in the overall mobile terminal market expected to boost revenue growth. Notably, NXP's single-chip solution Trimension SR250, aimed at the industrial and IoT markets, combines on-chip processing capabilities with short-range ultra-wideband radar and secure ranging, which could drive sales in the upcoming reporting quarter. Zacks data estimates NXP's industrial and IoT revenue at $620 million, a year-on-year increase of 2.1%; the forecast for the mobile terminal market is $394 million, indicating a year-on-year growth of 4.5%. However, NXP's third-quarter performance is likely to be impacted by the continued weakness in the automotive and communication infrastructure terminal markets. Inventory adjustments being made by some direct Tier 1 automotive customers are expected to weaken NXP's performance in the third quarter. The sluggishness in the communication infrastructure sector, due to weak global base station deployments and a faster-than-expected shift in demand for gallium nitride products, is anticipated to be a major headwind for the company. Meanwhile, macroeconomic concerns, escalating geopolitical tensions, and high inflation are expected to weigh on its customers' IT spending. Zacks data currently estimates automotive business revenue at $1.82 billion, a decline of 3.6% year-on-year; the estimate for communication infrastructure and other sectors in the third quarter of 2024 is $414.3 million, a year-on-year decrease of 25.9%. Previously, Texas Instruments (TXN.US) will be the first to announce its financial report as a bellwether in the semiconductor industry. Although last quarter's performance seemed to signal a glimmer of hope for the industry, analysts expect challenges in the automotive and industrial supply chains in the December quarter due to weak demand for automotive and electric vehicles, as well as a lackluster outlook for the industrial market. Additionally, competition among global companies is intensifying, particularly in the domestic analog market in the United States. These factors have led analysts to lower their December quarter expectations for Texas Instruments, NXP, Microchip Technology (MCHP.US), ON Semiconductor (ON.US), and Allegro MicroSystems (ALGM.US) In addition, after ON Semiconductor announced better-than-expected quarterly results last week, the company's President and CEO Hassane El-Khoury stated that despite the performance exceeding expectations, the company will continue to focus on achieving sustained performance through execution and prudent financial management in the current environment