Chipmaker NXP Semiconductors (NASDAQ:NXPI) reported second-quarter results late Monday evening. The Dutch-Texan company posted lower sales and earnings due to the ongoing COVID-19 health crisis but management also sketched out a gradual return to normalcy in the fall. Chinese customers are already stocking up on industrial computing chips and products designed for the Internet of Things.

NXP Semiconductors' second-quarter results by the numbers

Metric

Q2 2020

Q2 2019

Change

Analyst consensus

Revenue

$1.82 billion

$2.22 billion

(18%)

$1.81 billion

GAAP net income (loss)

($214 million)

$46 million

N/A

N/A

Adjusted earnings (loss) per diluted share

$1.42

$2.32

(39%)

$0.84

Data source: NXP Semiconductors. GAAP = generally accepted accounting principles. The adjusted earnings figures may not be comparable to analyst estimates.

Automotive computing sales fell 35% year over year to $674 million. Mobile chips and communication infrastructure product revenues dropped 14% and 9%, respectively. The automotive market has been spinning its wheels all summer long as automakers of every description paused their production due to COVID-19 concerns. The mobile drop includes NXP selling its mobile voice and audio solutions to Chinese chip designer Shenzhen Goodix over the winter. That division accounted for roughly $150 million of total sales in fiscal year 2019, removing a respectable chunk of change from NXP's quarterly revenue reports.

NXP's best-performing division was found in industrial and internet of things, where revenues rose 12% year over year to $435 million. The recently acquired Wifi 6 business from mobile chip-designer peer Marvell (NASDAQ:MRVL) helped here, on top of solid orders from Chinese customers.

"The good growth in Q2 in industrial and IoT has been carried largely from a Chinese footprint perspective, and that also continues into Q3," CEO Kurt Sievers said in the earnings call. "China has seen the biggest impact from the pandemic in Q1 already and then a pretty good recovery in Q2, while Europe and the U.S. have been essentially shut down for the earlier part of Q2."

A technician wearing goggles holds up a semiconductor chip for a closer inspection.

Image source: Getty Images.

What's next for NXP?

The same holds true for the automotive market, which is gearing up for a stronger showing in the third quarter. Communications and mobile sales are expected to fall by low double-digit percentages in the next report, compared to the year-ago period. Automotive revenues will drop approximately 20% lower and the strong industrial segment will continue to show mid-teens growth.

NXP's management believes that the second quarter may have been the deepest part of the COVID-19 downturn. Third-quarter sales are expected to land near $2.0 billion, 12% below the year-ago period's result. The usual caveats apply because the disease remains unpredictable and nobody knows whether we'll see another market-moving wave of infections and lockdown orders.

If this really was the worst of it, NXP pulled through with flying colors. The company reported positive non-GAAP earnings and $340 million in free cash flows, and we're still talking about a leader in the vibrant market for automotive computing solutions.