Semiconductor market sees first ever June fall
June is usually a bumper month for the semiconductor market as fabs ramp up to supply production for the holiday season.
However, even though this June was five weeks rather than four, data collected by market researcher ICinsights saw a fall. This is the first fall in June since 1976 and marks the softening of the chip market, which it called “extraordinary”. The company is revising its 11% forecast for growth in 2022 as a result, following recent dramatic market forecast reductions by Gartner and longer term lower forecasts by Malcolm Penn of Future Horizons (see links below).
“The IC market recorded its first-ever June sequential sales decline this year, based on data from WEMA, SIA, and WSTS dating back to 1976,” said ICinsights. “Typically, high single-digit or double-digit sales gains have been the pattern for June IC sales. Even in its previously weakest year (1985), June IC sales increased 1%. Never, until this year, have June IC sales declined.”
The long lead times of chip production mean that these reductions in June reflect a reduction in orders earlier in the year, particularly in the consumer market where the cost of living crisis and rising inflation is hitting spending.
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“Much of the current IC market weakness is due to economic concerns caused by rising inflation, ongoing supply chain disruptions, and from suppliers and OEMs working to reduce IC inventory levels, it said. “Several semiconductor companies noted during their 2Q22 financial earnings calls that inflation has put a dent in consumer discretionary spending. Weakness was particularly evident for shipments of consumer PCs, low- and mid-level smartphones, televisions, game consoles, and personal electronics devices.”
This was echoed by comments from Infineon yesterday and Intel last week.
“In a difficult macroeconomic climate, Infineon continues to be well on the way thanks to its differentiating portfolio,” said Jochen Hanebeck, Chief Executive Officer of Infineon, which saw revenues rise 10% in Q3 to €3.6bn and expects similar growth in Q4 to €3.9bn. “Increases in energy costs, raw material prices and interest rates, the continuing pandemic and geopolitical uncertainties are all impeding economic growth. In some consumer-oriented end markets demand has recently weakened. We are keeping a close eye on market developments and are prepared to act swiftly.”
Some market observers have said that the long term growth of demand in semiconductors mean that historical data is no longer appropriate.
“The structural drivers decarbonization and digitalization continue to cause high demand for semiconductors,” said Hanebeck. “The global trend towards electromobility persists. Many countries are now seeking to secure independent energy supplies, which will further accelerate the expansion of renewable energy. We are also benefiting from continuing high levels of investment in communications infrastructure, data centres and cloud computing.”
However the fall reflects the historical cycle of the memory chip business.
“The biggest contributor to June’s total IC market decline was the sudden and dramatic drop in memory IC sales,” said ICinsights. “Q dramatic revenue downturn is not readily evident in the 2Q22 financial results from Samsung, SK Hynix, and Micron since June’s decline offset gains made in April and May. However, Micron is forecasting a -17% sales drop for its fiscal 4Q ending in August.”
The outlook is not good for the semiconductor market. “In 2Q22, IC market growth was flat, falling below the long-term average. Based on IC Insights’ assessments of company sales outlooks for the rest of this year, it appears that 3Q and 4Q IC sales stand a good chance of falling short of their long-term average growth rates, as well,” said ICinsights.
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