Dive Brief:
- Chipmakers Onsemi and Lattice Semiconductor Corp. both remain confident in their operational resilience in the face of tariffs, saying levies waged by the Trump administration aren't likely to have material impacts on their performances.
- In an earnings call Tuesday, Onsemi President and CEO Hassane El-Khoury highlighted the chipmaker's flexible and geographically diverse supply chain as pivotal in insulating the company from tariffs.
- Lattice, meanwhile, derives 80% of its revenue from outside the United States, which will likely mitigate any potential direct impacts of the duties, CFO Lorenzo Flores said on a separate earnings call Tuesday.
Dive Insight:
Chipmakers across the industry are still bracing for potential sector-specific tariffs to come down from the Trump administration.
Last month, the administration opened a Section 232 investigation into the national security implications of semiconductor imports — a precursor to possible future tariffs.
Despite the looming threat of levies, Lattice is hoping for further recovery in the second quarter and latter half of the year, after seeing demand drop in recent months. Q1 revenue came in at $120.1 million, down 14.7% year over year.
In the near-term, however, CEO Ford Tamer said the company shipped below true estimated demand last quarter "as we worked closely with customers to ensure alignment with their evolving product needs."
Looking at the tariffs, Flores highlighted that many of Lattice's products never cross the U.S. border, instead relying on foundries in Japan, Korea and Taiwan, as well as testing and assembly capacity in Taiwan and Malaysia.
"That said, we think it is prudent to work with our customers and distribution partners to mitigate the logistical and economic disruption from potential tariff regimes," Flores said. "The takeaway is that, based on available information, we expect the direct impact of tariffs on our business to be limited, but we are highly aware of potential indirect impacts."
Onsemi, meanwhile, said it's leaning on its 19 global facilities, as well as its external network, to limit the impacts of tariffs.
"Our expectation is that there will be minimal direct impact to our business," El-Khoury said during the earnings call. "At this time, we expect no major issues in servicing our global customer base and are assisting these customers to minimize their impact by optimizing our supply chains."
Like Lattice, Onsemi has been navigating a period of revenue decline. The company's Q1 revenue totaled $1.45 billion, down 22.4% YoY due in part to sluggishness in the automotive sector.
To better align with the lower demand, Onsemi cut its internal fab production capacity by 12% in Q1 and laid off 9% of its roughly 26,000-person workforce. The two actions are expected to save the company $25 million in Q2, CFO Thad Trent said on the call.
"We will continue to rationalize our manufacturing footprint, driving gross margin expansion towards our long term target and providing greater leverage in our business model as the market recovers," Trent said.
