Chip-maker forecasts suggest prolonged slow sales for EV and auto industry

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【Summary】Chip companies and a battery maker have confirmed concerns about the slowdown in electric vehicle (EV) and overall auto sales, suggesting that the slump may continue into 2024. On Semiconductor expects to ship $200 million less of its silicon carbide chips this year due to a shortfall in an order from an unnamed European automotive customer. Lattice Semiconductor also disappointed with its outlook for the fourth quarter.

FutureCar Staff Oct 31, 2023 9:29 AM PT

Chip-maker forecasts suggest prolonged slow sales for EV and auto industry

A couple of lesser-known chip companies and a battery maker have confirmed growing fears among investors about the slowdown in electric-vehicle and overall auto sales, which appears likely to continue into next year.

Monday was loaded with bad news from companies that make industrial chips for the auto industry, as earnings reports from On Semiconductor Corp. ON, -2.62% in the morning and Lattice Semiconductor Inc. LSCC, -16.35% in the afternoon disappointed Wall Street with their forecasts.

If inflation and high interest rates continue into next year, which is feasible, the slump in auto sales is expected to continue.

According to analyst David Williams from Benchmark, the reduced consumer buying power and overall macro backdrop will likely keep buyers on the sidelines for the next couple of quarters. Williams predicts that the slump in auto sales will carry through into the first part of next year, with most cycles running six to nine months.

On Semiconductor recently announced that it expects to ship $200 million less this year of its silicon carbide chips, which are used in EVs, due to a shortfall in an order from one unnamed automotive customer in Europe. However, the company remains optimistic about the long-term growth opportunity of EVs and expects its 2023 revenue to still be four times higher than 2022.

Despite the positive outlook from On Semiconductor, investors were rattled and the company's shares tumbled nearly 22%. Lattice Semiconductor, which sells chips used in advanced driver-assistance systems in cars, also disappointed Wall Street with its fourth-quarter outlook, causing shares to tumble 13% in extended trading.

In addition to the chip companies, Panasonic Holdings, Tesla's battery partner, announced a 60% production cut due to slower sales of some models to Tesla. This news further fueled investor concerns about the EV market, particularly after Ford executives stated that consumers were currently unwilling to pay a premium for EVs.

Semiconductor companies, including those in the auto industry, are often seen as indicators of future end-product demand. With the increasing use of semiconductors in automaking, they can provide insights into auto demand, especially in the EV sector. Unfortunately, these indicators do not look promising in the short term.