Semiconductor Match stats just before the bell
No effect of the tariff liver punch yet.
When you, like me, live a fortunate life and are blessed with hundreds of investor calls a quarter, you develop an allergic reaction to certain words you have heard too many times.
I still get nervous flickers over Covid, the financial crisis, AI, and now I can add tariffs to my list. I don’t know if it was used more by management or the analysts, but I got a rash in the process.
In all fairness, I did not experience many excuses for lack of performance nailed to the tariff coffin; instead, it was used to increase the level of uncertainty when guiding the next quarter and years. The right tariff glove of the trade regulation boxer has not landed yet, although Nvidia got a left hook by the embargo glove and is still spitting out its Chinese business that will be swept away in the next round.
The companies in the semiconductor supply chain have been busy moving things around. In general, the following activities have been going on:
US Onshoring and nearshoring manufacturing activity to avoid tariffs.
Offshoring US manufacturing to get closer to a non-US supply chain to avoid tariffs.
Closure of non-US North and South American distribution centres to avoid tariffs.
Reallocation of Chinese manufacturing to other asian locations to avoid tariffs on Chinese manufacturing.
Pausing investments due to higher uncertainties about who and what gets hit next.
Many of the investments required are long-term and will outlast the current administration. The next US administration (if there ever will be a next administration) can cancel the tariffs on day one, changing the environment once again.
The declared mega projects might not move at the declared pace to avoid getting hit by a drive-by tariff in a tweet.
What can be said with certainty is that we are entering a period with unprecedented uncertainty, and it will be vital to understand what is going on.
While I usually wait for the earnings season to be over to start my analysis of different areas of the supply chain, I have to realise that it is no longer useful, as a hailstorm of unpredictable tariff effects can hit us at any time.
I have developed a new methodology that enables me to obtain a supply chain overview at an earlier stage of the quarter through several dashboards that become increasingly accurate as companies report and inform my analysis.
While I observe other metrics than revenue, this is still the most essential tool to analyse the semiconductor supply chain. I can compare any quarter to any other quarter. Still, I will primarily use the quarter-over-quarter view and the year-over-year view (compared to the same quarter in the previous year) to counter seasonality.
This will be the basis of a lot of my analysis, and as always, you should feel free to draw your conclusions based on your proprietary knowledge.
It is time to introduce the dashboard.
Semiconductor Supply Chain - Year-over-Year analysis
Whenever I feature any of my supply chain maps, I am told that they are not accurate. After a few hours, when my amygdala is in a calmer state, I can reply that maps are never entirely precise; they are simplified approximations of reality that can still be very useful. My aim is not to be accurate to the umpteth decimal, instead I want to identify changes in the supply chain that can form the basis of new strategies.
I also have the advantage of being uncorporated, which means I can do what I want and only answer to the collective court of LinkedIn and my subscribers.
If you don’t like my maps or my methodologies, don’t waste time on them. Instead, I suggest you develop your own. I will be more than happy to give my feedback.
Each category in the Revenue Growth map represents the bulk of the revenue in that category. In the current version, Nvidia is considered a fabless semiconductor company, and its revenue is in the Fabless category. This makes the numbers more compatible with conservative high-level accounting that most semiconductor companies find enjoyable to track and then royally ignore.
As you will see in my research, a top-line number does not provide much insight, whether accurate or not. Nevertheless, a number is essential; it is not sufficient to know something is happening. You also need to know how much and how fast to make effective strategy decisions.
From a demand perspective, I am identifying three essential drivers of semiconductor revenue that subcontract and ODM companies support. While there are other demand drivers, these form a tighter supply chain that can be observed and analysed more easily.
The annual dashboard indicates that the overall growth in the Semiconductor market has been approximately 20% year over year. The AI server trail is evident, from Foundry to Fabless to subcontracting and culminating in substantial growth in the Server market.
The Semiconductor tools are part of the Capital Investment supply chain and are also in high demand due to numerous subsidies and Chinese buyers who have cleanrooms as their shopping cart.
The painful situation of semiconductor companies using the hybrid manufacturing model is evident. The overcapacity, in general, and in Silicon carbide in particular, has created immense price pressure, driving down revenue.
The materials companies have only experienced half the revenue growth of their semiconductor clients and less than half of the foundries (TSMC in reality), showing the distribution of wealth is skewed towards the foundries.
Similarly, with the packaging materials and the OSAT companies. This is part of the supply chain that is undergoing dramatic change at present. The booming advanced packaging industry, along with the entry of Intel and TSMC, is changing everything for OSAT companies. The packaging materials section of the supply chain is experiencing significant demand for their advanced materials, interposers and substrates that is well above capacity.
The Passive, Electromechanical, and Connector (PEMCO) market also experienced lower growth as AI server boards were populated with higher-value semiconductors than traditional server boards.
The PCB market benefited from a higher proportion of very large and very dense PCBs for AI Servers.
Semiconductor Supply Chain - Quarter over Quarter analysis
The seasonalities in the electronics and semiconductor industries make the revenue results for Q1 tricky to interpret. However, the results in Q1 2025 do not yet show the impact of tariffs.
The lower server growth number is due to Nvidia revenue being allocated to semiconductors. If the server part were assigned to the server market, the growth would have been positive, as will be shown later.
Over the next period, I will conduct in-depth analyses of the individual sectors of the supply chain to provide more insights.
This was the last regular round of the Semiconductor industry versus the tariff boxer. From now on, things are going to get interesting. It will be imperative for semiconductor companies and their supply chain partners to not only manage their business under pressure but also be brave enough to make some significant bets.
From now on, we can expect to see significant changes in market shares and operating profits based on the composition and location of individual supply chains.
While companies may have a good understanding of the tariff's impact on their own business, they will have less insight into its impact on the demand situation.
The State of Demand
The consumer seasonality of the PC and Smartphone markets drives the seasonality of the subcontractors. Therefore, the 12.5% decline is not an immediate cause for alarm. Also, this is the time of year when the dates of the Chinese New Year celebrations can affect revenue trends.