The semiconductor industry is heading for its biggest downturn since the Internet bubble in 2000, and one of the largest in the history of chipmaking according to the latest figures from Future Horizons.
The market in 2023 is set to fall by nearly a quarter back to $450bn, after growth of 4% in 2022, says Malcolm Penn at Future Horizons, which accurately predicted the current market situation. This compares to other forecasts of 11% growth in 2022, which have been downgraded from earlier more optimistic predictions, and is “due to the worsening economic outlook,” says Penn.
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The downturn, the industry’s 17th, is driven by a range of factors, from higher inflation, global recession, higher interest rates and China’s aggressive Covid strategy that disrupts the supply chain, he says in the company’s September update today. “There is a huge inventory problem out there so it’s going to take a hit but eventually every product line will be hit, so in Q3 [this year] you will see a more subdued tone in the industry and a less ‘gung ho’ response.”
But the cycles will continue, returning the industry to growth in 2024 and to $1tn by 2032 he says, a couple of years later than more optimistic predictions.
“You see a range of bounce backs in the market,” he said. “We do believe in the average growth of 8% per year in unit terms, but with -22% growth next year then it will be single digit growth in 2024 so it’s yes for a trillion dollars but it’s more like 2032, the industry is not running out of steam.”
“The real winners are design which grows in a downturn, and the EDA industry, as we always design our way out of a downturn. You have to invent your way out of the recession but downturns are when real market share gains are made,” he said.
“What should be happening is we should invest like crazy but that won’t happen, plans will be delayed and that will feed the next upturn,” he said. “You have this dilemma – the structures on the industry are fuelling the industry cycle and we will see a dramatic cutback in capex and then they will wake up at least a year behind just as they were in 2021 and every other upturn.
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