Needham analyst N. Quinn Bolton saw a slowdown in demand across most end markets coupled with several quarters of inventory purge is likely to significantly decrease semiconductor sales in C2H22 and 2023 from original base case estimates.
His data analysis and other macro influences lowered C2H22 and 2023 estimates for most of his semiconductor coverage under a note titled "Semiconductors Appear to Be on the Brink of an Inventory-Driven Downturn."
Bolton saw a semiconductor downturn as likely to begin in 3Q22. He expected ~$591 billion for semiconductor sales in 2022, up 6.3% Y/Y vs. his original base case estimate of ~$631 billion.
Beginning in 2Q20, he believes significant inventory build in end markets has occurred, with semiconductor shipments cumulatively exceeding natural consumption by nearly $100 billion from 2Q20-2Q22E.
He also saw that overall demand for semiconductors has increased during this period, providing a higher base for semiconductor sales in the coming years, not likely to fall below $500 billion.
Inventory levels in end markets are likely to peak in 2Q22-3Q22. He believed an inventory-driven downturn may lead to semiconductor sales decreasing 5.3% (off a ~$591 billion base) in 2023 to ~$559 billion.
His estimates signified double-digit growth in 2024 (13.6% Y/Y to ~$636 billion off a ~$559 billion base) and 2025 (15.6% Y/Y to ~$735 billion).
Due to his downside semiconductor sales analysis, he cut revenue, earnings estimates, and price targets for a majority of his semiconductor coverage (excluding Credo Technology Group Holding Ltd (NASDAQ: CRDO) and Rockley Photonics Holdings Limited (NYSE:RKLY)).
Affected companies are Analog Devices, Inc. (NASDAQ:ADI), Allegro MicroSystems, Inc. (NASDAQ:ALGM), Ambarella, Inc. (NASDAQ:AMBA), Intel Corporation (NASDAQ:INTC), Monolithic Power Systems, Inc. (NASDAQ:MPWR), Marvell Technology, Inc. (NASDAQ:MRVL), MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI), MaxLinear, Inc. (NASDAQ:MXL), Navitas Semiconductor Corp. (NYSE:NVTS), SiTime Corporation (NASDAQ:SITM), Semtech Corporation (NASDAQ:SMTC), and Vicor Corporation (NASDAQ:VICR).
