Auto Chip Supply Shortages Now a Thing of the Past

Auto chipmakers' stock prices have plummeted as customers use the excess inventory they gathered when there was a shortage.

The chip shortages caused by the pandemic nearly four years ago appear to be in the rear view mirror. Image via Shutterstock.

Mobileye Global, a self-driving technology company, announced a forecasted downturn in its 2024 revenue, attributing it to a reduction in orders as customers manage excess microchip inventory, according to Reuters.

The Israel-based company, whose clientele includes automotive giants like Volkswagen and Porsche, saw its shares plummet by 28.2%, reaching a more than one-year low at $28.52. Mobileye had previously navigated the challenges of the chip supply crisis of 2021 and 2022 successfully.

Mobileye's difficulties stem from a change in the buying patterns of its Tier 1 customers, who had aggressively stockpiled chip inventories to circumvent the shortages experienced in the past two years. However, with supply chain concerns easing, these customers are now using their accumulated excess inventory, leading to a reduced demand for new chip orders.

The company's internal estimates indicate an excess supply of 6 to 7 million units of its highest revenue-generating product, the EyeQ advanced driver-assistance chip. Consequently, Mobileye expects its Q1 revenue to be approximately 50% lower than the previous year. 

This decline in demand has not only affected Mobileye, but also caused a ripple effect across the sector. Shares of other auto chipmakers, including NXP Semiconductors, Onsemi, Texas Instruments and Wolfspeed, have dropped between 2% and 5.1%. Additionally, Intel, Mobileye's parent company, experienced a share price decline of about 2.2%, falling to $46.02.

Looking ahead, Mobileye anticipates a 2024 operating loss between $468 million and $378 million, a substantial increase from its preliminary 2023 operating loss of $39 million to $33 million. The company's adjusted operating income forecast for 2024 is also projected to be lower, with expected revenues ranging from $1.83 billion to $1.96 billion. This projection falls significantly short of the previously estimated $2.58 billion, according to LSEG data.

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