The downturn in the semiconductor industry is well underway and will turn the corner later this year, says market analyst Future Horizons.
“The correction is process but we will overshoot and we expect there are two quarters possibly three before the market rebalances,” said Malcolm Penn, CEO. “It takes about four quarters to rein in capital spending and that’s what causes the overshoot. There’s a still a lot of overcapacity,” he said.
The market will see a reduction of around 22% in 2023 as a result, he says.
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“We still have growth hampered by Covid supply chain issues and interest rates are yet to peak, and there is uncertainty on the reopening of China. Added to this is a third of advanced economies are heading for recession and inventory has yet to be purged from the supply chain,” he said.
The downturn was led by the memory business but will be followed by logic chip and analog he says.
“Logic only just gone negative and analog is following. Even TSMC is talking about a poor first half of 2023,” he said.
“We are sticking with -22 per cent for 2023 so we are looking at a large contraction. The lowest I can get it down to is -17 percent,” he added. “The 17th downcycle is in full swing and we have a long way to go and -22pc is inevitable. The recession will prolong the downturn and delay the recovery.
“There’s a danger in thinking that the applications will compensate but the inventory has to adjust to new levels of production,” said Penn. “It’s nothing to do with the products or the technology, it’s cyclical. Cutbacks in capacity will happen next year and there are nuances that will be different but the fundamentals will be the same.”
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As previously highlighted this won’t slow down the long term growth of the industry. “We are looking at the trillion dollar year in 2034, maybe 2033,” he said.