Europe vulnerable in coming chip downturn
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The European semiconductor market is in recession and particularly vulnerable, says the latest market update from Future Horizons.
“There’s a hell of a lot of uncertainty about this year,” said Malcolm Penn, chairman and CEO of market research firm Future Horizons in his quarterly update for the semiconductor market.
He is predicting a 2024 semiconductor market growth of 15% and 8% in 2025 as the downturn starts. “Every warning light is flashing at least amber if not red,” he said.
“The initial outlook for 2024 was 16% and from January it was a trainwreck, it really was a very dramatic turn, it was a tumultuous period,” he said.
“Europe is not in good shape. When the market went into the downturn Europe stayed strong with industrial and automotive. That has been blown out of the water. It went into the downturn perhaps a year after the rest of the word and now automotive and industrial are not doing well, so we are seeing negative growth there.”
The boom in spending on semiconductor capacity is a distinct worry even though the spending is slowing down.
“46.5% of the total capex spend is going into China and they only make 10% of units. There are several worrying things about that as the capex spend is in the more mature technologies, analog and microcontrollers. The two regions that will be vulnerable to that are Europe and Japan rather than the US.
“All this Chinese investment is in 300mm technology while most of the world is on 200mm and it will be very hard to compete with a 300mm cost structure. This could force traditional companies to upgrade and that means the need to build new factories as the ceilings are not high enough [for 300mm equipment] which could lead to more consolidation or more excess equipment,” he said.
The downturn is expected to hit in early 2025 before the European semiconductor market recovers .
“The death cross will signal when the industry gets back into troubled times,” he said. “It’s very unlikely to happen this year but is likely in the first quarter of 2025. We have some dangers on the horizon. Optoelectronics and discrete have not been performing well, and there are discretes in every electronic product, and the microcontroller market is tailing off and going negative. The analog market has also seen 17 months of negative growth and that is a bellweather for the industry.”
“There will be six months of getting the inventory under control and it will take a long time for the 20% over capacity to be absorbed but we are adding capacity so we have potentially an excess capacity that will last through all of 2025 and possible longer.”
Moore’s Law will continue to drive the industry, he says, although Intel will continue to struggle, he says.
“Moore’s law has been killed more times than Dracula but its not dead, its not even sick Dennard scaling is over, that’s for sure, but that was never Moore’s law. We are building a lot of 3D structures now, both vertically and horizontally, and those roadmaps are pretty secure for the next ten to 15 years,” he said.
“Intel has a hell of a big challenge,” he said. “They are struggling, losing money and downsizing, that doesn’t bode well.”
“When you get behind it takes ten years to catch up. The semiconductor heart in me hopes they will success as they lost the plot. Technically they should be able to do it if then can get the people but engineers also want to work for successful companies with technical challenges.”
But there is need for strong competition to TSMC and Samsung at the leading edge of chip manufacturing. “We need more than just two companies out there for competition, it’s not good for the industry,” he said.
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