(Bloomberg) – Broadcom Inc. CEO Hock Tan said customers were sharpening semiconductor orders at an unprecedented rate, trying to allay concerns that it would create an abundance later.
“We are seeing customers accelerate early delivery bookings and seek to build buffers and create the imbalance in demand supply that you all hear there,” Tan said during a conference call for earnings.
About 90% of Broadcom’s offering in 2021 has already been ordered by customers. Usually, chipmakers locked up about a quarter of their supply that way. Since mid-2020, the company has revised its order backlog to make sure it is in line with the actual consumption of end products such as smartphones and network equipment. While some industries have complained about a shortage of chips, Tan said Broadcom has enough production from its outsourced suppliers to meet the needs of its customers, with the expected order levels.
“We believe it really is,” Tan said. “Our revenue reflects what consumers consume.”
Across the industry, delivery times – how long it takes to get a chip after you order it – have risen above 14 weeks. This has caused customers to deliberately order too many semiconductors to avoid future supply shortages. This duplicate order often leads to cancellations of orders and later revenue for chipmakers.
Slide shares have fallen in recent days due to concerns that the industry’s earnings are peaking. Tan’s assurance that the current expansion is sustainable was questioned during Thursday’s call. Broadcom shares slipped about 2.5% in extended trading.
Nearly a year ago, Tan was one of the first CEOs of chips to warn customers to order early to guarantee the offer.
Despite a seasonal decline in smartphone chip orders, Tan expects second-quarter fiscal revenue to grow by about 17%, and growth to continue throughout the year. He nevertheless acknowledged that this growth rate is extraordinarily high. He also noted that Broadcom customers can not cancel orders.
The company predicted revenue for the three months to end-April to be about $ 6.5 billion, compared to an average analysis of $ 6.33 billion.
Broadcom is one of the largest chipmakers in the world with businesses spanning smartphone parts, key components of network equipment and semiconductors that manage Wi-Fi equipment and set-top boxes. This reach, which also includes mainframe and security software, makes the projections an indication of the future demand for large technology companies such as Apple Inc., Samsung Electronics Co. and Google.
In the first fiscal quarter, Broadcom reported that its major chip division, semiconductor solutions, generated $ 4.91 billion in sales. Analysts were looking for $ 4.93 billion, according to data compiled by Bloomberg.
(Updates to the quarterly earnings beginning in the ninth paragraph.)
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