NXP Projects Stalling Car-Chip Demand as Mobile Sales Expand

  • Forecast for third-quarter sales matches analysts’ estimates
  • Automotive sales seen flat or showing slight decline

NXP Semiconductors NV, the world’s biggest supplier of chips used in the automotive industry, said sales in the segment will be stagnant or may even decline during the third quarter, while forecasting overall revenue in line with analysts’ estimates.

As autos stall, NXP is pinning its hopes on revived demand for chips used in mobile devices. The Dutch company’s second-largest business, making semiconductors for secure connected products, may expand as much as 20 percent in the period, Chief Financial Officer Dan Durn said on a conference call with analysts.

NXP forecast revenue of $2.42 billion to $2.52 billion in the three months ending in September, according to a statement. The mid-point of $2.47 billion matches the average analyst estimate, according to data compiled by Bloomberg.

The NXP downturn was surprising because competitor Texas Instruments Inc. said during its quarterly results that the autos segment remained strong, said Anand Srinivasan, an analyst for Bloomberg Intelligence. It’s “a very different message,” he said.

The forecast upturn in mobile products is bigger than he expected, Srinivasan said.

Shares of NXP declined as much as 5 percent before recovering somewhat. They were down 2.7 percent at $85.07 at 11:09 a.m. in New York Thursday, valuing the company at about $29.5 billion.

NXP, based in Eindhoven, Netherlands, said second-quarter sales rose 57 percent to $2.37 billion, compared with the average estimate of $2.35 billion. The biggest contributors were its secure connected devices and its automotive division with 9 percent and 7 percent quarter-on-quarter revenue growth respectively. The company reported a net loss of $13 million, or 4 cents a share, which it said was mostly driven by merger-related accounting.

NXP last month agreed to sell its standard products business, which makes diodes, transistors and other basic parts used in cars, industrial equipment and consumer electronics, to a group of Chinese investors for $2.75 billion. The company intends to use the proceeds to reduce debt and make acquisitions to expand into more-specialized products.

NXP bought Freescale Semiconductor Ltd. for $11.8 billion last year to cement its position in automotive chips. It competes with Texas Instruments in making semiconductors that turn everyday items into connected devices, and supplies chips for a range of applications, including advanced driver assistance systems, infotainment and in-vehicle networking between different car systems. It also makes chips used in smartphones and tablets.

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