Hitting the Brakes: Automotive Semiconductors
Its a quarter too soon to go dumpster diving in the automotive semiconductor industry. Another round of cuts is likely coming. Consider this my earnings preview.
I have leaned bearish automotive semiconductors for a few months, and I think the call has been mostly correct. For me, the beginning of my bearishness started when I highlighted that China would try to murder the supply aspect of the market for the foreseeable future.
In my SiC as a Dog part 2, I mentioned that it does look like Silicon Carbide will be an utterly commoditized substrate market in the long term. So not only am I bearish the macro, but I’m probably bearish the most significant and fastest-growing segment within Automotive.
Then, shoes finally started to drop this year, as Mobileye was the first company to cut estimates meaningfully. Texas Instruments, for example, has had multiple quarters of a slow bleed-out of results, but Mobileye was the accurate indicator that an automotive cycle had come.
The expectation for Mobileye, and now multiple automotive semiconductor companies across the industry, is that Q1 is a drastic and swift cut in revenue to clear inventory. Then, throughout the year, there should be a gradual recovery.
The problem is that I continue to see signs of over-inventory, and I think the only shoe to drop will be this first quarter. Multiple things have made me change my view. Let’s evaluate them all, and then let’s talk about the automotive semiconductor companies. They are buys at some point, but bad news is still coming.