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Some market forecasters are in denial, says Future Horizons’ Penn

Market news |
By Peter Clarke


Four market analysis teams have significantly underestimated how much the global chip market will contract in 2023, according to veteran analyst, Malcolm Penn, CEO of Future Horizons.

In recent days Gartner, IC Insights, Semiconductor Intelligence and World Semiconductor Trade Statistics have predicted that the global chip market will shrink in 2023 by 3.5, 5.0, 6.0 and 4.1 percent, respectively. These four agree why the market is set to shrink but quantitatively stand a long way apart from Penn’s own analysis, which forecasts  that 2023 will see a 22 percent market contraction (see Chip market growth in 2023 will be ‘deeply negative’ says analyst).

Penn said that the small declines predicted by other market analysts seem to ignore the deep cyclicality of the semiconductor industry and how it is now closely coupled to macroeconomic trends. “I see this as a re-run of the upturn. They were predicting single-digit percentage annual growth while I was up at 20 percent and I was proved correct.” According to WSTS the global chip market increased in value to US$555.9 billion in 2021, up by 26.2 percent compared with 2020.

“They don’t want to rock the boat and seem to tip-toe around with their forecasts. Of course, it is possible to get close to the right number if you drip-feed the market with figures three or four times a year,” Penn added.

Many of the forecasters that have come out with their recent downward revisions, acknowledge that consumer spending on smartphones and other electronics has dropped away because of inflation and other economic pressures. But they also seem to indicate that automotive, industrial, communications infrastructure and other enterprise-driven markets will stay reasonably robust in 2023. This is something with which Penn takes issue.

“Automotive may still be strong today but that is because there was a backlog, but that market will also suffer eventually as will industrial electronics and others,” he said. Analysts that don’t acknowledge that are: “whistling past the graveyard,” Penn said. “A car is still a discretionary purchase and it will be put off when people are struggling with the cost of energy and food,” said Penn.

On the industrial front Penn said that hiring freezes and job cuts had just started to come in and these will also have their effect on reducing demand for electronics and slowing the various regional economies. Meanwhile US-China sanctions and China’s zero-covid policy has been driving that massive economy into reverse.

When all is factored in it leads Penn to believe the imminent semiconductor recession could be one of the deeper ones that the sector has endured over its history rather than a shallow dip.

Penn said: “The problem is that we haven’t been through this sort of situation for 20 years or more. Many younger people in the industry think it is different this time around. It isn’t.”

Related links and articles:

www.futurehorizons.com

News articles:

WSTS lowers chip market forecast for 2022, 2023

Global chip market to fall 5% in 2023, says IC Insight

Gartner remains bullish on 2023 chip market prospects

Global chip market contraction of 6% in 2023, says analyst

Chip market growth in 2023 will be ‘deeply negative’ says analyst

Analyst warns semiconductor downturn has started


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