Excess inventory hits Silicon Labs

Silicon Labs has been hit by the downturn in the industry with a fall of 29% in 2024 to $584m, down from $782m in 2023. This was down to excess inventory at customers that are slowly easing, and is taking a cautious view of 2025.

“The biggest issue has been end user excess inventory and that’s what we have been focussing on reducing,” said Matt Johnson, President and Chief Executive Officer at Silicon Labs.

“We have lower visibility than we have historically had in recent years. I wouldn’t bank on a significant acceleration from here. Posting 7% growth in the March quarter is significant but we are entering the year with caution.”

The company put a brave face on the Q4 figures, pointing to significant demand for its chips in smart metering, glucose metering and electronic shelf labels.

“The Silicon Labs team executed well to close out 2024, with fourth quarter revenue nearly doubling from the same quarter one year ago,” said Johnson. “Looking ahead, we expect sequential revenue growth to resume beginning in the first quarter and are encouraged by our 2025 outlook as design wins across several key focus areas continue to ramp into production throughout the year.”

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“One of the things we have seen is increasing short lead time orders which is an ideal fit for channel partners and what we would like to have happen is larger inventory to serve those orders,” said Dean Butler, CFO. “Once we get back a normal steady state we would look to our own inventory to 100 days and distribution with 78 days. Distributors seem reluctant to take on inventory right now.”

Johnson sees design wins in areas such as WiFi, Bluetooth and Matter driving growth.

“We expect growth in Wifi, we see growth in Bluetooth, we see growth in Matter and there are multiple other applications and technology trends that we see as growth drivers. We see Matter as net favourable to the industry and to Silicon Labs,” he said.

“There is frustration out there for some as Matter is taking longer than expected as there are a lot of moving pieces. It continues to move forwards and the infrastructure is being built out and what that does is create the real opportunity for us with the deployment of devices and that’s where we thrive. We have been the largest code provider of any semiconductor company and since the spec was ratified two years ago we have won more business than in the prior five years combined. Existing devices want to adopt and deploy matter and we see new devices as well. We are cautiously optimistic that this is a win for the industry and a win for us.

Overall revenue for Q4 was $166 million, with $89m from Industrial & Commercial9 million, down 8% sequentially and $339m, down 32% on the year. Home & Life revenue for the quarter was $78 million, up 11% sequentially but down 14% for the full year at $246m

The decrease in revenues in 2024 was due to decreased revenues of $158.1 million from the Industrial & Commercial products and $39.8 million from the Home & Life products. Unit volumes and average selling prices of its products decreased compared to 2023 as customers sought to reduce inventory levels that had become elevated as a result of the supply chain disruptions during the pandemic, it said.

The company expects first-quarter revenue to be up slightly to between $170 to $185 million as it recovers through 2025. “What we are basing our outlook in in 2025 is design win ramps which should be consistent through the year. We do have confidence that we will likely grow each quarter,” said Johnson.