During the two years of the pandemic, MCUs were ubiquitous, demand exploded, the market size soared, and manufacturers profited handsomely. However, prosperity often comes with bubbles.

After the pandemic subsided, chip shortages became history, replaced by inventory reduction, cost reduction, and price wars. Last year, the MCU market experienced a downturn. Faced with overcapacity, weak demand, and intensified competition, the MCU industry is undergoing an unprecedented reshuffle.

1. Microchip: Performance plummets, plans factory closures and layoffs!

As one of the global MCU leaders, Microchip’s financial report for the past two months showed revenue of $1.026 billion, a 41.9% year-on-year and 11.8% month-on-month drop. Inventory levels reached a staggering 266 days!

Faced with plummeting demand, Microchip announced the closure of its Arizona wafer fab, affecting 500 employees and suspending expansion plans.

Even more astonishingly, Microchip voluntarily declined a $162 million subsidy from the US government, citing “overcapacity in the chip market.” This move clearly demonstrates the unprecedented difficulties facing the industry.

2. ST: MCU business plummets 30%, initiating major layoffs!

STMicroelectronics (ST) is also facing tough times. For the full year 2024, MCU revenue fell 30.2% year-on-year, and overall net profit plummeted 63%.

To make matters worse, ST’s market share in China is gradually declining, and the rise of low-priced domestic MCUs is encroaching on its territory.

Faced with shrinking demand, ST has initiated a layoff plan, with an expected reduction of 2,000-3,000 employees, or approximately 6%. Some factories will also be closed.

3. NXP: Inventory soars, with 1,800 global layoffs!

NXP’s (NXP) financial report is also worrying. Revenue fell 5%, profits declined 13%, and inventory turnover days reached 150 days, far exceeding the industry average.

Faced with performance pressure, NXP announced 1,800 global layoffs, focusing on streamlining non-core departments while retaining high-value R&D teams, in line with its strategic shift. and reduce capital expenditures in 2025.

NXP’s over-reliance on the automotive market has been severely impacted by the slowdown in global electric vehicle demand, leaving it struggling in the short term.

4. TI: Continuous decline in performance, high inventory!

TI (Texas Instruments) is once again in the red, with full-year 2024 revenue down 12% year-on-year and net profit down 26%, marking the second consecutive year of declining performance.

In terms of inventory, TI’s total inventory has increased to $4.5 billion, with inventory turnover days reaching 241 days. Faced with the market downturn, TI has decided to cut capital expenditures and implement cost reductions and efficiency improvements globally to survive the downturn.

However, TI is still increasing its investment in the Chinese market, with its revenue in the Chinese market growing 15% year-on-year.

5. Infineon: MCU business under pressure, production expansion plans postponed!

Infineon is struggling to survive, with MCU revenue down 8% year-on-year and profit down 13%. Demand from its key customer markets, automotive and industrial, remains weak.

Faced with market uncertainty, Infineon has decided to postpone the second phase of construction of its “superfab” in Malaysia and cut investment by 10% to avoid further losses from overcapacity.

At the same time, Infineon plans to increase investment in AI chips and expand a new factory in Germany, attempting to seize the market opportunities brought by the AI ​​wave.

The MCU industry currently faces three major challenges:

Inventory accumulation and fierce price competition: Over the past two years, many manufacturers have stockpiled MCUs to cope with shortages. Now that demand has plummeted and inventory is high, companies have been forced to resort to price cuts to clear inventory, resulting in a significant decline in industry profits.

Market saturation and intensified competition: A large number of new players have entered the MCU market, resulting in oversupply in the industry. Leading companies such as ST and Microchip have even been forced to close factories and lay off employees.

The rise of domestic MCUs and the decline of foreign companies’ market share: Chinese manufacturers, leveraging price advantages and technological breakthroughs, are rapidly eroding the market share of international giants in the mid- and low-end MCU market. The performance of some companies, such as ST, has declined significantly in the Chinese market.

Faced with a challenging market, major manufacturers are adjusting their strategies:

Accelerating AI + MCU deployment: Many companies are launching AI MCUs with integrated NPUs (Neural Network Processing Units) to boost computing power and meet the demands of emerging markets such as smart homes, industrial automation, and autonomous driving.

Strengthening product integration and reducing costs: By integrating sensors, storage, and communication modules into MCUs, they are enhancing product competitiveness and meeting end-market demands.

Upgrading processes and improving energy efficiency: Advanced processes (18nm, 10nm, and even 7nm) are gradually being adopted in the MCU sector, improving performance while reducing power consumption to meet the demands of markets such as new energy vehicles and industrial control.

Deepening market penetration and strengthening local partnerships: For example, ST and Huahong are collaborating to produce 40nm MCUs in China, attempting to maintain their market share. Infineon and NXP are also increasing their investments in the Chinese market.

In the short term, the MCU market remains in a destocking phase, and competition remains fierce. News of layoffs and factory closures is likely to continue. However, in the long term, emerging sectors such as AIoT, autonomous driving, and industrial automation will continue to generate significant demand for MCUs, and the market will inevitably recover.