China’s chip market drops by a third as global free fall continues

Market news | March 6, 2023

By Peter Clarke

semiconductor China Analog

The value of the global chip market continued to fall in January with China’s market losing 31.6 percent of its value on an annual basis, according to figures from the Semiconductor Industry Association (SIA).

The SIA reports figures as a three-month moving average based on data collected by the World Semiconductor Trade Statistics organization.

The global chip market in the three months to the end of January 2023 was 18.5 percent smaller than it was in the same period a year before. This compared with a 14.7 percent fall a month before, and a 9.2 percent the month before that. There is a hint that the pace of the market contraction is slowing but there is no clear sign yet of the market reaching the bottom or how long it might languish there.

China is leading the market plunge but the sinking feeling was almost as bad in the US and elsewhere in Asia. The Americas chip market was 12.4 percent lower in January than a year before and the Asia-Pacific region, excluding Japan and China, was down 19.5 percent.

One glimmer of hope in the otherwise gloomy market is that the European and Japanese chip markets continued to grow. Europe’s market was up 0.9 percent year-on-year, while Japan’s was up 0.7 percent.

The Americas, Asia-Pacific and China are the largest markets for chips with just over a quarter of the global total each. Europe and Japan are responsible for about 10 percent of the market each.

A year before China bought more than a third of the world’s chips but its market has been falling in value faster than other regions, most likely due to a mix of covid lockdown measures being taken during 2022 and US sanctions. It is still possible that Europe and Japan markets will tip into contraction later in 2023. Market analysts are generally predicting a return to annual growth for the chip market in 2H23.

Three-month average of chip sales by geographic region for January 2023 and December 2022. Source: SIA/WSTS.

According to January’s 3MMA sales data the Chinese market was worth US$11.66 billion, down 31.6 percent from the same period a year before. The Asia-Pacific market, excluding China and Japan, was valued at US$10.77 billion, down 19.5 percent. The Americas region was down 12..4 percent annually, Europe up 0.9 percent and Japan was up 0.7 percent.

“Despite record-high sales in 2022, the global semiconductor market cooled considerably during the second half of the year, and that trend continued during the first month of 2023,” said John Neuffer, CEO of the SIA, in a statement.

Monthly data is given by the SIA as a three-month average although the source of the data, World Semiconductor Trade Statistics, tracks monthly data. The SIA and other regional semiconductor industry bodies opt to use averaged data because it evens out the actual data that typically shows troughs at the beginnings of quarters and peaks at the ends of quarters.