When Broadcom Inc. reported slower sales growth than some of its peers on Thursday, Chief Executive Officer Hock Tan gave a surprising reason: It was on purpose.
Even with demand for its chips surging, the company is tightly controlling which orders it fills, he said on a conference call Thursday following Broadcom’s third-quarter report. The idea is to sacrifice some current sales to avoid creating a glut in the future.
“We can show bigger numbers, but that means we will build inventory in the wrong places,” Tan said. The company is applying “discipline to supply” and focusing on where it’s really needed, he said.
The unusual situation — one of the world’s biggest chipmakers deliberately suppressing earnings — is the latest sign of upheaval in the $400 billion semiconductor market. The industry is racing to meet a huge spike in demand as the economy rebounds from the pandemic and companies stock up on components. Tan said some of that demand is “unsustainable.” In other words, if he sells too many chips to certain customers now, demand will crash later.