In the aftermath of the semiconductor shortage that impacted various industries, particularly automotive, companies are now adjusting to the shifting market conditions. According to a report by Mobileye, a significant chipmaker, the auto industry’s response to the chip scarcity involved accumulating large inventories to safeguard against prolonged shortages. This strategy, however, has led to an excess of stock as vehicle sales begin to decline.
Mobileye anticipates that its customers, primarily major auto suppliers, will utilize most of their surplus inventory in the early part of the year. “As supply chain concerns have eased, our customers are expected to draw down on this excess inventory in the first quarter,” the company stated.
Consequently, Mobileye forecasts a decrease in its chip sales, estimating 4 to 6 million fewer chips sold and a 50% reduction in revenue for the first quarter compared to the previous year.
The company has not specified which of its customers are holding specific amounts of inventory. Mobileye’s largest tier 1 customers include auto suppliers ZF, Valeo, and Aptiv, contributing 38%, 18%, and 15% to Mobileye’s revenue, respectively, as per the latest annual report. These tier 1 suppliers, along with others, predominantly serve automakers and constitute the bulk of Mobileye’s business.
This pattern of supply and demand adjustment is not unique to the auto industry. Other sectors and chipmakers, like Taiwan Semiconductor Manufacturing Co. (TSMC) – a supplier to companies such as Apple, Qualcomm, and Sony – have also experienced similar challenges. TSMC reported declining revenues in 2023 as its customers managed their inventory levels. However, as of October, there were early indications of demand stabilization, according to company executives.
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