In the past two years, the semiconductor market has experienced an unprecedented boom period, but from the second half of this year, demand turned to a decreasing trend and faced a period of stagnation. Not only memory, but also wafer foundries and semiconductor design companies have been hit by the cold wave, and the semiconductor market may “reverse growth” next year. In this regard, semiconductor manufacturing companies have begun to reduce investment in facilities and tighten their belts; Start avoiding the crisis.
1. Global semiconductor sales negative growth of 4.1% next year
This year, the semiconductor market has rapidly changed from boom to bust and is going through a period of intensified change than ever before.
Since 2020, the semiconductor market, which has enjoyed prosperity due to supply chain interruptions and other reasons, has entered a severe cold period in the second half of this year. According to SIA, global semiconductor sales were $47 billion in September, down 3% from the same month last year. This is the first sales decline in two years and eight months since January 2020.
With this as a starting point, it is expected that the global semiconductor market sales will grow significantly this year and reverse growth next year. At the end of November this year, WSTS announced that the global semiconductor market is expected to grow by 4.4% compared with last year, reaching 580.1 billion US dollars. This is in stark contrast to last year’s 26.2% increase in semiconductor sales.
Global semiconductor sales are expected to be about $556.5 billion next year, down 4.1 percent from this year. In August alone, WSTS predicted that semiconductor market sales would grow by 4.6% next year, but returned to negative forecasts within 3 months.
The decrease in semiconductor sales was due to a decrease in shipments of home appliances, TVs, smartphones, notebook computers, and other ancillary products, which were major demand-side. At the same time, due to global inflation, the new crown epidemic, the Russian-Ukrainian war, interest rate increases and other reasons, consumers’ desire to buy is declining, and the consumer market is experiencing a period of stagnation.
In particular, sales of memory semiconductors fell the most. Memory sales are down 12.6 percent this year from last year to $134.4 billion, and are expected to decline further by about 17 percent next year.
Micron Technology, which ranks third in DARM share, announced on the 22nd that in the first quarter (September-November 2022) results announcement, the operating loss reached 290 million US dollars. The company predicts even bigger losses in the second quarter of fiscal 2023 until February next year.
The other two memory giants, Samsung Electronics and SK Hannix, are likely to decline in the fourth quarter. Recently, the securities industry predicted that SK Hynix, which has a high dependence on memory, will run a deficit of more than $800 million in the fourth quarter of this year.
Judging from the current memory market situation, the actual price is also falling sharply. According to the agency, the fixed transaction price of DRAM in the third quarter dropped by about 10% to 15% compared with the previous quarter. As a result, global DRAM sales fell to $18,187 million in the third quarter, down 28.9% from the previous two quarters. This is the largest decline since the 2008 global financial crisis.
NAND flash memory was also oversupplied, with the average selling price (ASP) in the third quarter down 18.3% from the previous quarter, and global NAND sales in the third quarter of this year were $13,713.6 million, down 24.3% from the previous quarter.
The foundry market has also ended the era of 100% capacity utilization. It fell to more than 90% in the past three quarters and to more than 80% after entering the fourth quarter. TSMC, the world’s largest foundry giant, is no exception. The company’s customer orders in the fourth quarter were down 40 to 50 percent from the beginning of the year.
It is understood that the inventory of set products such as smartphones, TVs, tablets, and PC notebooks has increased, and the cumulative inventory of semiconductor companies in the third quarter has increased by more than 50% compared with the first quarter.
Some people in the industry believe that “until the second half of 2023, with the arrival of the seasonal peak season, the situation of the semiconductor industry is expected to be completely improved.”
2. Reducing investment and production capacity will solve the IC inventory problem
After the decrease in semiconductor demand and the accumulation of inventory, major semiconductor suppliers began large-scale tightening operations by reducing production and reducing investment in facilities. According to the previous market analyst firm IC Insights, global semiconductor equipment investment next year will be 19% lower than this year, reaching $146.6 billion.
SK Hynix said in its third-quarter results announcement last month that it decided to reduce the scale of investment by more than 50% next year compared with this year. Micron announced that next year it will reduce capital investment by more than 30% from the original plan and reduce the number of employees by 10%. Kioxia, which ranks third in NAND share, also said that wafer production will be reduced by about 30% from October this year.
On the contrary, Samsung Electronics, which has the largest memory market share, said that in order to meet long-term demand, it will not reduce semiconductor investment, but will proceed according to plan. But recently, given the current downward trend in memory industry inventory and prices, Samsung Electronics may also adjust supply as early as the first quarter of next year.
The system semiconductor and foundry industries will also reduce facility investments. On the 27th, Intel proposed a plan to reduce operating expenses by US$3 billion next year and reduce the operating budget by US$8 billion to US$10 billion by 2025 in its third-quarter results announcement. Capital investment this year is about 8 percent lower than the current plan.
TSMC said in its third-quarter results announcement in October that the scale of facility investment this year was planned to be $40-44 billion at the beginning of the year, a reduction of more than 10%. UMC also announced a reduction in planned facility investment from $3.6 billion this year. Due to the recent reduction in FAB utilization in the foundry industry, a reduction in facility investment next year seems inevitable.
Hewlett-Packard and Dell, the world’s largest computer manufacturers, expect demand for personal computers to decline further in 2023. Dell reported a 6 percent drop in total revenue in the third quarter, including a 17 percent drop in its division, which sells laptops and desktops to consumer and business customers.
HP Chief Executive Enrique Lores said PC inventories are likely to remain high for the next two quarters. “Right now, we have a lot of inventory, especially for consumer PCS, and we’re working to reduce that inventory,” Lores said.
Conclusion: International chipmakers are relatively conservative in their business forecasts for 2023 and are ready to implement cost containment measures. While demand is generally expected to recover in the second half of next year, most supply chain companies are unsure of the exact starting point and extent of the recovery.
Post time: Jan-09-2023