Revenue Decline of Global Top 10 IC Design Houses Expanded to Nearly 10% in 4Q22, Decline Expected to Continue into 1Q23, Says TrendForce

April 27, 2023 -- The global economy has faced increased inflation risks and downstream inventory corrections in 2H22, which have affected IC design houses faster than wafer foundries, as they are far more sensitive and responsive to market reversals. TrendForce reports that adverse factors such as weak overall consumption, restrictions from China, and the slowdown of corporate IT spending and CSP demand have impacted the revenue performance of the world’s top 10 IC design houses in 4Q22, leading to a QoQ decline of 9.2%, or approximately US$33.96 billion.

TrendForce predicts that the revenue of these top 10 companies keep declining—though with a slight convergence—into 1Q23, owing to ongoing inventory corrections across the entire supply chain as well as Q1 being the traditional off-season for consumer demand. Demand will continue to be weak despite new product launches and inventory replenishment in the supply chain.

MediaTek was most impacted by weak terminal demand and inventory correction among the top 5 companies

Most IC design houses saw their revenue fall in 4Q22 due to a weak consumer market and customer inventory adjustments. Qualcomm’s business revenue from smartphones and IoT fell 22.6% and 16.2%, respectively, resulting in the company’s revenue contracting to US$7.89 billion—a 20.3% QoQ decline. Nevertheless, Qualcomm once again came out on top with Broadcom following close behind at US$7.1 billion—a 2.4% QoQ increase. Broadcom’s revenue growth can be largely attributed to server storage connectivity, broadband, and wireless networks, which have offset the impact of inventory adjustments.

NVIDIA’s Q4 revenue reached US$5.93 billion—a 2.7% QoQ decline, which indicates a slight convergence compared to the previous two quarters—largely due to an increase in revenue from gaming and automotive fields thanks to the launch of the company’s high-end RTX 40 series graphics cards and stable automotive demand, which offset the revenue decline from data centers and the professional visualization sector. AMD’s revenue increased 0.6% due to higher adoption rates of EPYC CPUs by data centers and the acquisition of Xilinx, which helped drive the FPGA and DPU business, bringing overall revenue to US$5.6 billion. MediaTek, whose main business revenue comes from smartphones and other consumer product chips, saw the greatest drop in revenue as all its product areas were affected; smartphone revenue experienced the greatest decrease at around 30%. MediaTek’s Q4 revenue was only US$3.45 billion—a 26.2% QoQ decrease.

Novatek made a significant leap in the rankings, surpassing Realtek to secure the seventh position. The company’s Q4 revenue reached US$715 million—an 11.2% QoQ increase—representing the highest growth among all top IC design houses in 4Q22. These latest quarterly earnings have put an end to Novatek’s persistent revenue decline, reversing a trend that persisted for four consecutive quarters. This development indicates that while the panel industry initiated inventory adjustments in 4Q21, by the end of 2022, inventory levels had reached a relatively lower level and suppliers are now in the process of restocking. Novatek benefited from inventory replenishment of TV-related components such as TV SoC, Tcon, and LDDI, with revenue from SoC and driver IC business increasing by 2.1% and 16.1%, respectively. Realtek, which fell to the eighth position, was impacted by weak demand for PCs and laptops, loss of Ethernet orders, and restrictions from China, resulting in a staggering, nearly 30% QoQ decline to US$694 million.

It is worth noting that Apple, as Cirrus Logic’s major customer, accounts for over 80% of the company’s revenue, and even 90% during the peak season. As a result, Cirrus Logic’s revenue grew by 9.3% in 4Q22, reaching US$591 million, primarily due to the release of new iPhone models. However, this also implies that the company’s revenue growth or decline is heavily influenced by demand fluctuations for Apple’s smartphones. This trend will become particularly noticeable in 1Q23, which is traditionally a slow season for smartphone shipments. As the contribution from new iPhones diminishes, Cirrus Logic’s revenue could experience an even more substantial decline. Finally, other companies, such as Marvell, reported a Q4 revenue of US$1.46 billion—a 4.8% QoQ decrease—primarily due to a significant decline in revenue from storage server applications. On the other hand, Will Semiconductor benefited from inventory demand for some new Android devices, resulting in a 2.7% QoQ revenue increase, or approximately US$531 million.