Leading IC design houses see revenues drop in 3Q22

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Trendforce, the market intelligence firm, has reported that the revenues generated by the global IC design industry slowed in 3Q22.

The main factors driving this slowdown were the Russia-Ukraine military conflict, the recent COVID-19 lockdowns in China, ongoing inflation, and clients undergoing inventory corrections.

Total revenue of the global top 10 IC design houses came to $37.5bn for 3Q22, representing a quarter-on-quarter decline of 5.3%.

Qualcomm took first place in the ranking of the global top 10 IC design houses by revenue for 3Q22, while Broadcom returned to second place overtaking NVIDIA and AMD, who slipped to third and fourth respectively due to weakening demand for PCs and cryptocurrency mining machines.

Qualcomm saw a quarter-on-quarter increase in sales of smartphone SoCs and 5G modem chips. It also made gains in the automotive electronics market by expanding its collaborations with partners in the sector. As a result, its revenue figures for mobile and automotive offerings reflected quarter-on-quarter increases of 6.8% and 22.0% respectively. The revenue growth of these two major product categories offset the marginal decline in the revenue for RF front-end chips.

Qualcomm’s IC design revenue climbed by 5.6% over the quarter to $9.9bn putting it firmly in first place.

Broadcom saw revenues up by 6.8% quarter-on-quarter reaching $6.94bn and should its acquisition of VMware be approved it will be in a position to challenge Qualcomm for the number one spot.

NVIDIA managed to raise sales for chips deployed in data centres and automotive electronics during the third quarter, however, these gains were not enough to compensate for the freeze in the demand for graphics cards equipped in cryptocurrency mining machines.

NVIDIA reported a quarter-on-quarter drop of 32.6% in the revenue from solutions for gaming and a 44.5% drop in revenue from solutions for professional visualization. Taken altogether, NVIDIA posted a quarter-on-quarter decline of 14.0% to just over $6bn.

Among Taiwan-based IC design houses in the top 10 group for 3Q22, MediaTek posted a drop of 11.6% to $4.68bn, due to Chinese smartphone brands’ weak sales performances and clients undergoing inventory corrections.

Realtek saw sales for networking and automotive applications remain stable in 3Q22. However, chips for PCs account for about 32% of its product mix, so the fall in demand for consumer electronics during the same period affected its overall performance. Realtek’s 3Q22 revenue came in 5.5% lower at $979mn.

TrendForce pointed out that IC design houses have different product mix strategies and while demand has been steady for those whose product mixes are mainly composed of solutions for data centres, networking hardware, IoT devices, automotive electronics, etc., demand has weakened significantly for consumer electronics, display panels, and cryptocurrency mining machines, so the revenues from the related solutions have shrunk as well.

Looking to Q4 and to 2023, TrendForce said that because of inflation and the ongoing need to adjust inventory levels the next two quarters would be very challenging for IC design houses, and the chance is high for them to post negative quarter-on-quarter revenue results.