Japan's Renesas Electronics expects revenue to fall in the next quarter as the semiconductor market declines and the cost of electricity to run its fabs rises.

The company's third-quarter sales rose 2.8% from Q2 to 3.876 billion pounds ($26.2 billion), but warned it would fall to 3.85 billion pounds in the fourth quarter.

"Weaknesses in PC and mobile are now extending to peripherals," said Renesas CEO Hidetoshi Shibata. "This guide worries me." "

While demand in the automotive business remains strong, the other half of the Internet of Things (IoT) chip business is softening.

"We're building up our inventory, which is something we can do for legacy products, but less so for growth products," Shibata said. "In the fourth quarter, we're building up our mold library. We do need to consider some lead times and we will see a temporary increase in inventory in Q4 and Q1."

Power costs for fabs are also a growing concern, said Renesas Chief Financial Officer Naruse Shinkai. "In terms of production costs, we expect electricity costs to continue to rise," he said.

The company has been expanding into IoT chips over the past few years, acquiring Dialog Semiconductor and, more recently, artificial intelligence company Reality Analytics and Indian 4D radar chip company Steardian Semiconductor.