Factory Moves Due to Tariffs Causing 'Pause' in Ordering Patterns, Says Chipmaker
Silicon Labs shares closed down 14 percent to $76.85 Wednesday after revenue came up $5 million short of low-end Q4 revenue guidance. Citing “macro uncertainty and volatility,” the company scaled back its Q1 guidance to $183 million-$193 million, said Chief Financial Officer John Hollister on a call. IoT, infrastructure, broadcast and access are projected to be lower.
Sign up for a free preview to unlock the rest of this article
Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.
CEO Tyson Tuttle attributed shortfalls to the macro environment and “not to share loss,” citing China’s “difficult environment” due to a slowdown in gross domestic product and factory activity as customers move production elsewhere on tariff concerns. He noted “accumulation of inventory” at certain key customers.
Economic conditions are “decelerating in major markets around the world,” leading to a semiconductor industry “down cycle,” Tuttle said. Noting it has been a decade since the last “macro correction,” he said: “The question is, is this one going to be short-lived with a quick rebound, or is it going to be more protracted?” Some of that will be determined by the U.S.-China relationship and "Huawei, ZTE, in terms of the tariffs,” he said.
“We've certainly seen a bit more churn in terms of moving production from one location to another,” Tuttle said, along with inventory movement, which has caused “a pause in a lot of the ordering patterns.” He called geopolitical and trade factors “much more turbulent now than they were before” due to a “different set of factors out in the macro economy. It's not a housing bubble.” Tuttle held out hope that U.S. consumer confidence remains strong, driving “a more normal return to growth.”
IoT products grew 17 percent for the year to more than $460 million, including $37 million from the company’s buy of Z-Wave in Q2, said Hollister. Wireless products now comprise more than 60 percent of total IoT revenue, delivering nearly 30 percent year-on-year growth, he said. The company saw the weakest sequential revenue performance in the Americas, led by declines in wireless, automotive, isolation and access businesses.
Tuttle cited IDC estimates the worldwide smart home market will grow at a 20 percent compound annual growth rate 2017-22 -- to 1.3 billion devices shipped -- largely on adoption of sensors for AI and edge computing applications. Wireless technology such as Z-Wave 700 are enabling the “battery powered sensor trend” and making devices easier to install and deploy, he said. The company is well-positioned to “consolidate the smart home experience,” said Tuttle, noting Xiaomi launched at CES smart lighting products based on Silicon Labs' Wireless Gecko SoC and Bluetooth mesh software for the China smart home market.
Also at CES, Tuya, an artificial intelligence and IoT platform provider in China, announced it's using the Wireless Gecko platform -- including SoCs, ZigBee and Bluetooth software -- to allow multi-protocol products to connect to multi-node mesh networks in smart homes, he said.
In response to the expected Q1 sales decline, the company is slowing operating expense spending, Tuttle said. Silicon Labs is “closely monitoring the macro environment in managing headcount growth” and discretionary spending.