The Chinese telecom bidding market is on the upswing, as major tenders are being issued by key telecom operators.
This resurgence is fueling replenishment demand for network ICs, spelling out a promising revenue outlook for Taiwanese suppliers in this sector.
The impressive revenue performances of key players like Realtek Semiconductor, RichWave Technology, and Airoha Technology in the first quarter of 2024 can be largely attributed to the growth momentum generated by Chinese telecom projects. This positive development signals a more optimistic growth prospect for the entire network infrastructure beyond 2024.
Among them, Realtek saw its revenue jump 30% year-on-year in the first quarter of 2024, surpassing the previous cautious estimates. RichWave witnessed a remarkable 35% year-on-year revenue growth for the period, while Airoha's revenue also surged by 26.29%. The revenue results show that network IC demand remained surprisingly robust during the traditionally slow first quarter.
Until the beginning of 2024, networking ICs were still undergoing inventory destocking, marking the final phase of the overall destocking cycle. Following a year of subdued demand for networking infrastructure across various countries in 2023, IC design firms have approached tender-driven demand cautiously, despite optimistic projections from customers regarding their shipment pull-ins.
Nevertheless, there are now clearer signs of increasing momentum in customer pull-ins compared to 2023. This bodes well for a return to normal revenue levels from networking infrastructure, and there's even a chance for last year's outstanding 2023 demand orders to be fulfilled.
Industry observers highlighted that the resurgence in demand for networking infrastructure across various countries, including China, stems primarily from the overall upgrade trend for Wi-Fi and GPON (Gigabit Passive Optical Networks). With the rapid advancement of cloud and edge AI applications, ever-higher network speeds are increasingly required, necessitating constant evolution of networking infrastructure to satisfy the escalating market requirements.
However, upgrade requirements vary across countries. The US and Europe show a more definitive stance towards specification upgrades, while budget constraints are hindering widespread upgrades in China. Similarly, India, a promising growth market, currently prioritizes lower specifications.
Some industry observers remarked that the inventory destocking phase at the networking supply chain is nearing its completion. The timeline for overall demand recovery now hinges on the implementation progress of projects and their budget planning. It's widely expected that further market growth momentum will surface in the second quarter.
As infrastructure budget spending schedules vary across different countries, it's difficult to give a universal timeframe for the surge in network infrastructure demand. However, it's evident that numerous networking infrastructure projects, long-awaited by the market in recent years, are set to materialize one after another throughout 2024.
Whether this heightened demand pattern can be sustained over the coming quarters, or if the current replenishment is solely aimed at low-inventory items, will be a crucial aspect for market observation. Realtek's upcoming investor conference this month will serve as a significant indicator for market direction.
