Following the dire figures for the semiconductor market in June, analyst Malcolm Penn of Future Horizons warns that the downturn has begun.
“The current semiconductor super cycle is finally drawing to a close and the 17th market downturn has now well and truly started,” he said.
“Anecdotal indication of the downturn has also started to filter into the industry consciousness, especially at the commodity end of the market, with several second-tier foundry houses and IDMs reportedly mulling scaling back or postponing their planned capacity expansions.”
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“PC and smartphone shipments, two key semiconductor market drivers, are both showing declines in the first half of 2022, with PC shipment now reportedly at their lowest level since 2019, and smartphone shipments expected to show negative growth in 2022,” he said. This was highlighted in recent results from Intel.
“Products that require specific manufacturing capacities, such as automotive, are still showing signs of tightness, but the end market demand for cars is likely to soften as prospective customers, now squeezed by and struggling with inflation and a massive spike in energy costs, put off buying that new car,” said Penn.
“With demand for consumer MCUs, display drivers, power management and other mass-market chips falling, nearly all mature node fabs have seen their customers scale back wafer starts for the second half of 2022 prompting several second- and third-tier foundries to start cutting prices. Some are even rumoured to be offering fire-sale incentives and cut-price deals for additional wafer orders to maintain their fab utilization rates. Such actions will, however, we believe, prove fruitless given the industry-wide pressure, and customer need, to offload bloated inventories, built up over the past two years of supply shortages.”
This will have an impact on plans for rising prices at foundries and in building new fabs.
“Whilst TSMC is in a better position overall, due to its market dominance especially at the leading-edge – leading-edge capacity is, by definition, always in short supply – it too will not escape the effects of the downturn, given the wide diversity of the end markets it serves,” said Penn. “We believe TSMC will need to tread very carefully indeed … if it carries out its plan to raise its prices in 2023 against the prevailing market trends.”
Penn will update his figures for the semiconductor market in 2022 and 2023 in mid-September.
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