Lattice Stock Tumbles. It’s Another Bad Sign for the Economy.

The big news was the disappointing guidance. Lattice said it expects fourth-quarter revenue to be between $166 million and $186 million. Analysts surveyed by FactSet were expecting the chip maker to report fourth-quarter sales of $195.8 million.

“Towards the end of Q3—really in the last four to six weeks of Q3—we started to see demand soften from our industrial and automotive customers,” CEO James Anderson said on the company’s conference call.

Anderson noted the weak order trends started in Asia and had spread to Europe in the current quarter. The company also saw deteriorating demand from telecom infrastructure customers. He said lower demand is leading to a reduction in investment spending.

Needham analyst N. Quinn Bolton cut his price target on Lattice shares to $75 from $90 but maintained his Buy rating on the stock. He wrote in a research note Tuesday that “higher interest rates and cost of capital are pushing out spending in many of LSCC’s end markets.” Bolton expects the economic weakness facing the company to extend for another two to three quarters.

Lattice’s difficulties echo those of rival
ON Semiconductor
(ON), which said on its earnings call that it’s seeing “increasing risk to automotive demand due to high interest rates.” ON Semi shares fell by 22% on Monday after the results.

The deterioration in orders from auto customers is a bad sign for the general economy. The sector was the one area that had held up for chip makers over the last year. The Federal Reserve’s aggressive action to fight inflation now seems to be having a negative impact on that part of the economy, as well.

ON and Lattice are saying the weakness will last multiple quarters. For investors, that means the long-anticipated chip recovery is even further into the future.

Write to Angela Palumbo at angela.palumbo@dowjones.com