Just recently, the semiconductor sector was registering high growth in the market, pulling investors from all quarters. The area was healthy and many companies had hopes for high returns. Reports by Zacks Equity Research indicate the sector accounted for 57.8% of growth in technology this year. And that was evident in the filings of the second quarter earnings of some of the semiconductor juggernauts such as Intel, Micron, Broadcom, and more.
However, the Q2 earnings projected by Microchip Technology Inc. (NASDAQ:MCHP) has showed a slump. When the company revealed its preliminary second quarter net sales projection, many investors saw an urgent need to run. The report released on Thursday October 9 saw many investors go into sell-off frenzy on Friday, something that’s likely to impact negatively on many companies in the semiconductor area. And it became clear that the heydays are quickly fizzling away.
Besides lowering its revenue outlook, Microchip Technology Inc. (NASDAQ:MCHP) went ahead to send a warning, saying that the semiconductor industry’s health isn’t getting any better. Several companies are facing a huge challenge due to falling demands by China and Europe.
Zacks Equity Research’s projections for Q3 have also shown that the sector will register only 2.8% in earnings increase, down from 12% posted in Q2. The same narrowing down is true for revenue as well.
Microchip Technology Inc. (NASDAQ:MCHP) expects $546.2 million in net sales, which includes sales from its latest ISSC acquisition. The company’s projections indicate the huge bearing that the industrial slowdown in China has on the industry. The Chandler, Arizona-based company had expected high sales in the month of September, which is known to be a busy month, but that wasn’t to be as factors weren’t favorable.
Similar woes were witnessed in the semiconductor ETF industry as well. A high volume sell-off began Friday, barely a day after Microchip Technology Inc. (NASDAQ:MCHP) submitted its Q2 projections.
This article has been written by Victor Ochieng.