Melexis sees demand for chips from the automotive sector normalizing

Chip developer Melexis is gradually ending its ‘cooling off period’. The Ypres company largely met analyst expectations in the first quarter, while CEO Marc Biron signals that stocks in the automotive sector are normalizing.

Minus 21 percent. That was the rather atypical balance sheet for the Melexis share on the Brussels stock exchange for the time being this year. Investors expected a significant slowdown in the automotive sector, which is crucial for the chip developer, a sentiment that was supported, among other things, by a warning from chip company TSMC about the car market last week.

Melexis itself also reported a slight cooling in its market in recent quarters. The car makers, who have built up a lot of inventory in recent years in times of chip shortages, would correct that inventory to bring it in line with the sluggish demand for cars. Every car that rolls off the production line worldwide contains an average of 18 Melexis chips. Electric cars in particular are bursting with chips, but that is precisely a market that is taking a hit.

The impact of the inventory correction appears to be reasonably reasonable after the first quarter. Melexis

reports a turnover of 241.8 million euros in its quarterly figures, right in the middle of its own projections for the quarter. That is slightly lower than what analysts had hoped for on average (243 million euros), but still a growth of 6 percent compared to the same quarter a year earlier. Compared to the last quarter of last year, there has been a contraction of 4 percent.

Melexis compensates for this with a slightly better than expected operational result. Operating profit amounted to 63.7 million euros, 4 percent more than last year and the previous quarter. That figure reflects cost savings and an adjustment in the structure that Melexis implemented in the previous quarter, it said. Also on a net basis, profit increased by 4 percent compared to a year earlier and even by 6 percent compared to the last quarter of last year, good for 52.9 million euros.

“The inventory corrections we saw in recent quarters are now behind us,” CEO Marc Biron insists. The Melexis CEO thus echoes the sentiment he also expressed after the annual figures: that the cooling-off period for Melexis would be short-lived.

Biron sees the electrification of the vehicle fleet and the great focus of manufacturers on safety and luxury trends as things that will continue to drive growth beyond the first quarter. In addition to the vital car market, which accounted for 90 percent of turnover in the first quarter, Melexis is also aiming for growth from new markets. Chips for robotics, new mobility, sustainability and healthcare should also help the company grow ‘beyond automotive’.

For the current quarter, Melexis aims for a turnover of between 242 and 247 million euros. For the full year, the company is sticking to previous projections: a turnover of ‘around 1 billion euros’, a gross margin above 44 percent and an operating profit margin above 25 percent.