Profits plummet at NXP

Profits plummet at NXP

Business news |
By Nick Flaherty

NXP is another semiconductor firm to be hit by the automotive downturn as a result of the Covid-19 pandemic.

“NXP delivered full-year revenue of $8.6bn, with 2020 being best characterized as two halves with completely different business trends,” said Kurt Sievers, NXP President and Chief Executive Officer.

The full year revenue figures at NXP were down 3 percent on 2019, similar to the fall seen by On Semiconductor, another a key automotive supplier, in its results yesterday. NXP’s automotive business was down nine percent for the full year, as was its communications infrastructure business. This lead to a fall in net profits of 35 percent to $418m, which all came from the last quarter with $468m using the internationally approved GAAP accounting standards.

“During the first half of the year, NXP was faced with the unprecedented shut down of our customers in most end markets and geographies because of the global pandemic,” said Sievers. “As we entered the second half of 2020, and our customers began to re-open, NXP experienced a very robust rebound in demand, which we anticipate continuing throughout 2021. In the fourth quarter, revenue was $2.5bn, an increase of 9 percent year-on-year, and near the upper end of our guidance range. During this time, we experienced especially strong trends in the Automotive and Mobile end-markets.”

The Q4 figures were up 24 percent on the previous quarter, and even 9 percent up on this time last year, highlighting the bounce-back at the end of 2020. But this has also caused supply chain problems and shortages of key chips for car makers.

“Notwithstanding a tumultuous 2020, revenue associated with key strategic growth areas accelerated throughout the year. We continued to maintain focused investments in critical R&D programs, which will assure the company’s long-term success,” he added.

Next: Q1 2021 forecast at NXP

Fourth-quarter revenue was $2.5 billion, up 9.0 percent year-on-year, and NXP expects to see Q1 revenues up to $2.6bn.

“When our customers began to reopen after the shutdowns in the second quarter, we did see order rates through Q3 and Q4 accelerate at a very rapid rate,” said Sievers. “This trend has continued and it will likely be the case over several quarters to come. The increased demand has been broad-based across most of our focused end markets, most of our product portfolio and all of our geographies, as well as across our direct and our distribution fulfillment channels. We actually believe that the working from home trends because of the pandemic, which emerged in full force beginning in the first half of the year led to an explosion in demand for high volume consumer compute and mobile type products in the industry.”

This will continue to cause problems in the supply chain he says.

“As the auto and industrial markets begin to rebound in the second half of the year, the available foundry capacity was largely sold out. As a result, we and others are experiencing significant increases in lead times, and in certain cases, increased cost from suppliers,” he said. “Taken that altogether, the setup indicates a really robust demand environment combined with a very challenging supply situation, which we anticipate may continue for several more quarters, and we are working very diligently with both our external suppliers, our internal operations team and our customers to adequately aligned supply with demand.”

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