Siltronic Foresees Stagnant Chip Demand Due to High Inventory

By Ozan Ergenay

(Reuters) - German semiconductor materials supplier Siltronic expects sales to stagnate this year after a 7% drop in 2024, it said on Tuesday, citing high inventory levels and driving its shares more than 15% lower.

Chip stocks have come under pressure as higher demand from artificial intelligence (AI) has failed to make up for weak demand for automotive, PC and memory chips.

Concern about inflation and reduced demand has mounted after U.S. President Donald Trump announced tariffs against Canada, China and Mexico, although he paused them for one month except for China.

"For the year 2025, we anticipate that the growth in the end-markets, primarily driven by AI, will not yet be reflected in our wafer demand due to the persistently elevated inventory levels in the value chain," CEO Michael Heckmeier said in a statement.

Silitronic shares, which lost around 47% last year, fell 15.1% as of 0915 GMT, putting them on track for their worst day since March 2020 if losses hold.

Siltronic, which makes silicon wafers used in semiconductor chips, anticipates the first half of 2025 will be weaker than the second half of 2024.

It said on Tuesday wafer production for diameters up to 150 mm in Burghausen would stop at the end of July with a slightly negative impact on sales and a negligible impact on earnings compared to the previous year.

The German company also said mid-term targets would not be met by a 2028 deadline set previously. It did not give a new timeframe.

"The weak guidance is another disappointment," Stifel analyst Juergen Wagner said in a note, adding it could lead to a more than 20% revision to 2025 earnings per share forecasts.

Last week, STMicroelectronics, one of Europe's largest chipmakers, said it was too early to give forecasts for 2025 as a downturn in its automotive and industrial markets continued.

Siltronic, which cut its dividend late on Monday, on Tuesday reported preliminary 2024 revenue of 1.41 billion euros ($1.45 billion), down from 1.51 billion euros a year earlier.

That compared with expectations of 1.40 billion euros, based on a poll by Vara Research.

Siltronic said it would give a more detailed outlook at the release of its annual report on March 6.

($1 = 0.9713 euros)

(Reporting by Ozan Ergenay; Editing by Christopher Cushing, Sherry Jacob-Phillips, Louise Heavens and Barbara Lewis)