Shares of NXP Semiconductor NXPI took a 7.7% hit during Tuesday’s pre-market following the company’s announcement of a lower-than-expected third-quarter revenue forecast.

What Happened: The semiconductor giant is wrestling with a slowdown in demand from its automotive customers and rising geopolitical tensions, leading to an approximately 8% decrease in its shares in extended trading.

At the time of writing, NXP Semiconductor was trading at $261.81 in the pre-market after it closed at $283.81 on Monday, according to Benzinga Pro data.

NXP Semiconductors’ customer base includes Apple AAPL, Bosch BSWQY, Dell DELL, Ericsson, Flextronics, Foxconn FXCOF, and others.

The third quarter forecast from NXP Semiconductor follows its worst quarterly revenue decline in four years. The company expects third-quarter revenue to be in the range of $3.15 billion to $3.35 billion versus estimates of $3.35 billion. Its third-quarter adjusted earnings are expected to be in the range of $3.21 to $3.63 per share versus estimates of $3.56 per share.

The company’s automotive sales have experienced the steepest drop in over three years, according to LSEG data. Automotive clients, which make up NXP’s largest segment, have been cutting orders in anticipation of a more favorable macroeconomic environment and potential global central bank interest rate cuts.

The company is also evaluating the effects of strained trade relations between China and the U.S., and China and the EU. As export restrictions tighten, Chinese firms are ramping up production of older, or legacy, chips, which could impact NXP’s sales to China, its largest revenue contributor in 2023.

See Also: AMC Entertainment Announces Restructuring Of Debt Load, Adam Aron Says Box Office Challenges Are In ‘Rear

Why It Matters: Despite a 21% revenue increase in its mobile segment, driven by AI-linked upgrades, the decline in the company’s automotive sector has overshadowed this growth.

In an effort to address these challenges, NXP has invested $1.6 billion in a joint venture with TSMC-backed Vanguard to manufacture silicon wafers in Singapore, thereby diversifying its manufacturing base beyond China.

NXP’s second-quarter revenue decreased 5% year-over-year to $3.127 billion, beating analyst estimates of $3.125 billion. However, the company reported adjusted earnings of $3.20 per share, narrowly missing estimates of $3.21 per share.

Meanwhile, other chip stocks, such as Nvidia NVDA, Advanced Micro Devices AMD, and Intel INTC, were also trading lower in the pre-market.

Read Next:

Image via Shutterstock

This story was generated using Benzinga Neuro and edited by Pooja Rajkumari