ADI Chief Financial Officer Prashanth Mahendra Rajah said in a conference call on Tuesday (5th) that current revenue may exceed its previous forecast range, and annual revenue growth is expected to average 7% to 10% over the next five years.That suggests demand remains strong, downplaying concerns that customers are stockpiling.
According to reports from Bloomberg and Barron’s, Mahendra Rajah said on the same day that the company’s sales growth is trending towards the high point of its second-quarter guidance and may exceed the target of $2.8 billion, plus or minus $100 million, and in the long run , still confident in being able to report gross margins in excess of 70%.
Like many of its peers, ADI has seen a surge in sales and profits over the past 12 months as the company scrambles to fill orders from automakers and other customers desperate for supplies and willing to pay more.
This growth has heightened concerns thati.e. shipments exceed final demand for products that use chips. The Philadelphia Semiconductor Index has fallen 17% this year after rising more than 40% for three straight years as investors bet the industry is peaking.
Mahendra Rajah said that while investors were concerned about the buildup of chip inventories — often a precursor to an economic downturn — ADI didn’t see that happening. “Customers are concerned that they don’t have inventory,” he said in an interview. “There is still demand to meet.”
Like the rest of the management team, ADI leadership believes that the chip industry no longer relies primarily on computer and smartphone demand. Mahendra Rajah said semiconductors are used in more equipment, from industrial machinery to automobiles, and this diversification makes the company less vulnerable to sudden drops in orders in the past.
ADI CEO Vincent Roach also reiterated the predictions of several industry CEOs thatThe semiconductor industry will double in the next decade, total revenue will reach $1 trillion. It took the semiconductor industry about 45 years to reach $500 billion in sales.
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