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Chipmaker Analog Devices forecasts weak Q2 as excess supply hurts

FILE PHOTO: Illustration shows smartphone with Analog Devices' logo displayed

(Reuters) - Chipmaker Analog Devices forecast second-quarter profit and revenue below estimates on Wednesday, as it grapples with uncertain demand from the industrial and automotive sectors.

The earnings follow a weak forecast from Texas Instruments last month and underscore the challenges facing the chip industry as businesses across sectors clear excess inventory that piled up with the pandemic-driven demand boom fading.

"Consistent with our prior view, we expect customer inventory rationalization to largely subside in our second quarter, and thus enter the second half in a more favorable business backdrop" Analog Devices CEO Vincent Roche said.

The company expects $2.10 billion in second-quarter revenue, plus or minus 100 million, below analysts' average estimate of $2.36 billion, according to LSEG data.

Adjusted profit for the quarter is expected to be $1.26 per share, plus or minus 10 cents, also below estimates of $1.56.

The company's industrial unit, which accounts for nearly 50% of its revenue, reported a 31% decline in the first quarter due to the ongoing supply glut.

Growth in the automotive unit also slowed to a near-two year low of 9%. The auto industry has pulled back on chip orders in recent months as high interest rates affect demand for vehicles.

Research firm Canalys estimate growth in the global electric-vehicle market is set to slow to 27.1% this year as a reduction in state subsidies makes new cars less appealing to buyers.

Analog Devices' first-quarter revenue stood at $2.51 billion, above analysts' expectations of $2.50 billion.

(Reporting by Priyanka.G in Bengaluru; Editing by Shinjini Ganguli)

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