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Nvidia CEO Jen-Hsun Huang:
He wants a way out of the crisis.
Photo: Rick Wilking/ REUTERS
Two weeks ago, US chip manufacturer Nvidia issued a sales warning for the current quarter.
The poor forecast has come true, as the company announced on Wednesday in Santa Clara, California: Nvidia missed sales expectations for the quarter by $1.4 billion.
And even the server business for cloud solutions grew by just 1 percent.
Analysts at Deutsche Bank had expected 10 percent.
But the chip manufacturer was probably hit hardest by the minus of 44 percent in the important gaming area, which is heavily dependent on the consumer mood of the customers.
The economic downturn in the US and worldwide is hitting the chipmaker particularly hard because when the economy goes down, entertainment and computer game hardware are among the first things that private households save on.
Also harmful for Nvidia – the gaming boom that started around the world during the corona lockdowns is over.
Gambling is less attractive without a lockdown.
And another dependency is now proving to be fatal for the Americans.
The falling bitcoin price is affecting the company.
But not because Nvidia itself is invested in Bitcoin.
Bitcoin miners all over the world use Nvidia's high-performance processors for so-called mining.
However, since not only Bitcoin but also many other cryptocurrencies have been in crisis, the demand for data centers for mining has decreased.
The seventh largest chip manufacturer is thus an example of an industry that has known only one direction for years: upwards.
After all, semiconductor chips are a key technology for so many tasks that mankind has to deal with right now.
Today, no car drives, no factory and no power plant run without semiconductors.
Malte Schaumann, an analyst at Warburg Research, calls the small chips an "enabling technology".
"Many innovations are only now being made possible by semiconductors," he says.
The switch to electromobility and energy-efficient solutions in almost every sector would be unthinkable without semiconductors.
"This is clearly a growth market," says Schaumann.
Even a small recession-related dent would not counteract the long-term trend, says the analyst.
And yet the industry has been hailing sales and profit warnings for a short time.
Because the sale of PCs and smartphones collapses.
In the second quarter of 2022, PC manufacturers sold over 18 percent fewer devices than in the fourth quarter of 2021.
In a study published last week, a Jefferies analyst was also critical of the prospects for Germany's largest chip manufacturer, Infineon.
"The profit warnings have only just begun," the analyst wrote.
In fact, some car manufacturers and suppliers have ordered chip tranches several times, from different manufacturers.
While there have been massive delivery bottlenecks for semiconductors in the past two years, car manufacturers wanted to be sure of being supplied as quickly as possible.
As a result, Infineon has a huge backlog of orders.
According to analyst Malte Schaumann from Warburg Research, Infineon's current order volume corresponds to around three times the annual turnover of the Bavarian semiconductor manufacturer.
"Even if the order backlog were to be halved, Infineon would still be busy working through it for a long time," says Schaumann.
Schaumann is also not assuming that there will be any major cancellations.
The small chips also do not cause large storage costs.
"One of the lessons learned over the last few years was to expect higher inventories," says Schaumann.
However, Infineon is not completely immune to the effects of the recession.
Because it is unclear how car production will develop and what influence the recession and the discussion about company car privileges will have on the industry.
Above all, the decision to increase production capacity is associated with risks.
In semiconductor production, three quarters of the costs are fixed, says the analyst.
When a newly built factory shuts down, it can cost the company dearly.
The organization World Semiconductor Trade Statistics (WSTS), a kind of association of chip manufacturers, published current assessments of the development of the global market for semiconductors on Monday.
WSTS estimates the overall market growth for 2022 at 13.9 percent.
Growth of 4.6 percent is expected for 2023.
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