One of the topics of discussion over the New Year was of course the chip shortage and the huge amounts of cash being committed to new semiconductor capacity. The largest chip makers have committed over $450bn to new capacity, just under the value of the entire industry in 2020 at $464bn.
Will this lead to over-capacity and a collapse in the semiconductor market as we have seen in previous industry cycles and predicted by IDC?
Not so, say the optimists, there is a new era. Some forecasts have the semiconductor market reaching $800bn by 2028 and $1 trillion by 2032.
They point to past cycles that have been driven by single killer apps such as the PC In the early 1980’s, mobile phone, internet infrastructure, tablets and smartphones. When these markets became saturated the supply vs demand changed dramatically and the market slumped, leading to the dips.
Today’s cycle is different they say as there is no one killer app acting as a catalyst but instead we have multiple market growth events occurring simultaneously, many interdependent upon each other and all contributing to a rapid increase in TAM growth, they say.
These are unlikely to dip at the same time, smoothing out the growth in the semiconductor market.
“I really do not believe that we will predict the future semiconductor TAM by studying the cycles of the past, we are in a unique market, not just because of the pandemic but for the ubiquitous spread of semiconductors into all aspects of life and end products and I can only visualise this increasing rather than decreasing in the future,” said one highly knowledgeable commentator.
- Record high for semiconductor content in electronic equipment
- Chip market to rise 10.8 percent in 2022
- TSMC's $100bn fab plans to expand capacity
The pandemic has drastically accelerated the medical and telecoms markets through people working from home but hit the automotive sector in the short term not because of the semiconductors themselves but for management decisions made in the automotive sector when the pandemic struck.
The optimists do acknowledge it may not be plain sailing, and the industry may experience some blips in the growth rate and curve during the next decade, but the underlying trend for the semiconductor industry during the next 10 years will be substantial growth of 5 percent a year
“I do not think we can continue to use the historic trends of our industry to predict the future, we are entering an entirely new era and I think it would be wise for us all to open our minds to all kinds of new and exciting opportunities and possibilities,” says one distributor.
This is perhaps backed up by the increasing percentage of electronics in electronic equipment, rising to a record 33 per cent in 2021, and a record $680bn market in 2021.
However we have heard this before. The rise in multimedia and digital TVs led market researchers to similarly claim a new game-changing era, just before the semiconductor market collapse in 2000.