Global IC Design Industry Faces Challenges in 3Q22, According to TrendForce Report

Global market intelligence firm TrendForce has reported that the revenue of the global top 10 IC design houses decreased by 5.3% in the third quarter of 2022. The decline is said to be due to a range of factors, including the ongoing Russia-Ukraine conflict, recent lockdowns in China due to COVID-19, and inflation. Additionally, demand for products such as PCs and cryptocurrency mining machines reportedly weakened, leading to shifts in the revenue rankings of the top IC design houses. Despite these challenges, Qualcomm retained its position as the top-ranking IC design house by revenue, with Broadcom returning to second place by overtaking NVIDIA and AMD.

According to a report, US-based IC design houses were able to offset declines in revenue for certain products due to their product mix covering a wide range of applications. Qualcomm, for example, was able to increase its revenue for 3Q22 through gains in the sales of smartphone SoCs and 5G modem chips, as well as expanding its partnerships in the automotive electronics market. As a result, Qualcomm's revenue for mobile and automotive offerings increased by 6.8% and 22.0% respectively, offsetting the decline in revenue for RF front-end chips. Overall, Qualcomm's IC design revenue increased by 5.6% in the third quarter, allowing the company to retain its position at the top of the revenue ranking.

Broadcom had a strong third quarter in 2022, with its revenue increasing by 6.8% thanks to stable demand for networking devices in the high-end market. The company's acquisition of VMware is currently under review, and if the deal goes through, Broadcom will have a chance to compete for the top spot in the revenue ranking. Meanwhile, NVIDIA was able to increase sales for chips used in data centers and automotive electronics, but these gains were not enough to offset the decline in demand for graphics cards used in cryptocurrency mining machines. As a result, NVIDIA saw a drop of 32.6% in revenue from solutions for gaming and a drop of 44.5% in revenue from solutions for professional visualization, leading to an overall QoQ decline of 14.0% to $6.09 billion.

AMD saw an 8.3% increase in revenue from businesses related to data centers in the third quarter of 2022. For the first time, the revenue from data center solutions surpassed the revenue from client solutions, such as CPUs for desktops and laptops. However, AMD's overall performance was affected by a decline in demand for consumer electronics, leading to a 15.0% drop in revenue compared to the previous quarter, to $5.57 billion.

Marvell was able to increase its revenue by 2.5% in the third quarter of 2022 thanks to steady demand for its networking solutions. Meanwhile, Cirrus Logic returned to the top 10 group for IC design houses due to its leadership in the market for low-power and high-precision mixed-signal processing solutions. Despite weak sales of Android smartphones, Cirrus Logic saw an increase in the market penetration of certain audio chips for high-end Android smartphones, as well as benefiting from an influx of orders from Apple for the new iPhone 14 series. As a result, the company's revenue increased by 37.3% to $541 million.

Asian design houses in the top 10 group all posted a decline in revenue for the third quarter of 2022, likely due to a slump in demand for consumer electronics. Taiwan-based MediaTek saw an 11.6% drop in revenue to $4.68 billion due to weak sales by Chinese smartphone brands and inventory corrections. Realtek's revenue also declined by 5.5% to $979 million, with chips for PCs making up a significant portion of its product mix. Novatek experienced the steepest decline among the top 10, with a 39.9% drop in revenue to $643 million due to a decline in prices and shipments of its major product categories, including SoCs and display driver ICs.

Will Semiconductor, which is based in Mainland China, saw a 25.8% decline in revenue for the third quarter of 2022, to $513 million. The company's performance was likely affected by poor smartphone sales and COVID-19 lockdowns in China, as it primarily offers chips used in smartphones, including CMOS image sensors, TDDI solutions, and analog ICs.

The revenue results of the top 10 IC design houses for the third quarter of 2022 show a mix of gains and losses across different product categories. Some design houses saw steady demand for their solutions, such as those used in data centers, networking hardware, IoT devices, and automotive electronics, while others faced weaker demand for consumer electronics, display panels, and cryptocurrency mining machines. Overall, the semiconductor market has been in a slump recently, leading to revenue declines for more than half of the top 10 IC design houses. This highlights the fact that different design houses have different product mix strategies and can be affected differently by changes in market demand.

The fourth quarter of 2022 and the first quarter of 2023 are likely to be challenging for IC design houses. The ongoing inflation and a lack of significant increases in demand for consumer electronics during the year-end holiday season are expected to lead to negative QoQ revenue results for many design houses. However, this downturn period could also provide an opportunity for design houses to lower their inventory levels and raise their cash levels, as well as introduce their products to new application segments, such as data centers and automotive electronics. This could help them better prepare for the future recovery of the semiconductor industry.