SAN JOSE – Xilinx is not hearing any alarm bells, but it is forecasting sales will be down four to eight percent in its current quarter ending in September. The slowdown will come from a mixture of some products hitting end of life, some large customers living more off inventory and weakness in sectors including industrial and wired communications.
Despite the slight slump, the company does not see any indication of a broader downturn.
“We aren’t getting the feeling [customers] are canceling orders,” said John Olson, Xilinx’s chief financial officer, speaking to analysts on a quarterly earnings call. “Our backlog is down some, but not much and a lot [of customers] could push out or cancel if they needed to,” he said.
The report is in line with yesterday’s indications from chip giant Intel that forecasted continued sluggish conditions in semiconductors. Like Intel, Xilinx is something of a market bellwether because, though much smaller, its business is broad based across electronics sectors and markets.
The good news is wireless infrastructure spending, especially in North America, remains strong, fueled by the smartphone and tablet boom. It is expected to pick up through the end of the year as carriers including T-Mobile and Verizon boost spending on building out their LTE networks, Xilinx said.
The FPGA designer eked out four percent growth in sales in its quarter ending in June, but the $582 million in revenues were still down five percent from the same period last year. Net profits in the latest quarter were up six percent from the previous quarter but down 16 percent from last year’s quarter.
Xilinx is getting enough access to 28nm process technology from its key foundry, TSMC. But the company’s volume demands are relatively low.
The company sold more than $10 million in 28nm products in the quarter ending in June. It expects that to double in the current quarter and continue to grow through its fiscal year.
However, increasing costs of chips at 28nm and beyond is forcing the company to adopt a more disciplined product planning process. At 20nm and beyond, foundries expect to have to etch patterns on some parts of chips twice or even three times, requiring more complex masks and more lithography steps.
“We will be more careful in our tape outs and make sure every one counts,” said Moshe Gavrielov, Xilinx’s chief executive on the earnings call. “Our product planning is more meticulous at 28nm than it was [at previous nodes because] if mask costs go up 2x you can’t afford to have the same number of tape outs,” he said.
Xilinx hopes to leverage the trend to its advantage. It expects fewer companies will move as quickly to new process nodes for their ASICs and standard parts, opening a door for Xilinx to fill the gap with FPGAs and some ASIC- and SoC-like components in its portfolio.