Broadcom Inc CEO Hock Tan (陳福陽) said that customers are beefing up semiconductor orders at an unprecedented pace and tried to quell concern that this might create a glut later on.
“We see customers accelerating the bookings for early deliveries and attempting to build buffers and creating the demand-supply imbalance you all hear out there,” Tan told analysts during an earnings conference call yesterday.
About 90 percent of Broadcom’s supply this year has been ordered by customers. Normally, chipmakers have about one-quarter of their supply locked up in orders.
Since the middle of last year, the company has reviewed its order backlog to make sure that it aligns with the actual consumption of end products, such as smartphones and networking gear.
While some industries have complained of a chip shortage, Tan said that Broadcom, having anticipated order levels, has enough production from its outsourced providers to meet the needs of its customers.
“We believe this is real,” Tan said. “Our revenue reflects what’s being consumed by end users.”
Across the industry, lead times — how long it takes to get a chip after you order it — have surpassed 14 weeks. That has sparked concern that customers are purposely ordering too many semiconductors to head off supply shortfalls.
This double ordering often leads later on to order cancelations and declining revenue for chipmakers.
Chip stocks have slumped in recent days on concern that industry earnings are peaking. Tan’s assurances that the current expansion is sustainable were questioned throughout yesterday’s call.
Broadcom on Thursday shares slipped about 2.5 percent in extended trading.
Almost a year ago, Tan was one of the first chip CEOs to warn customers to order well in advance to guarantee supply.
Despite a seasonal decline in smartphone semiconductor orders, Tan expects fiscal second-quarter chip revenue to grow at about 17 percent and sees growth persisting throughout the year.
Still, he acknowledged that this growth rate is unusually high. He also said that Broadcom customers cannot cancel orders.
The company predicted that revenue in the three months ending in April would be about US$6.5 billion compared with an average analyst estimate of US$6.33 billion.
Broadcom is one of the world’s largest chipmakers, with businesses spanning smartphone parts, key components of networking equipment, and semiconductors that run home Wi-Fi gear and set-top boxes.
That reach, which also includes mainframe and security software, makes its projections an indicator of demand for major technology companies, such as Apple Inc, Samsung Electronics Co and Google.
In the fiscal first quarter, Broadcom reported its main chip division, semiconductor solutions, generated US$4.91 billion in sales.
Analysts were looking for US$4.93 billion, according to data compiled by Bloomberg.
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