Industry institutions frequently alert that the global semiconductor market faces a risk of decline in 2023

Release time：2022-12-05 Source：Electronics enthusiast

As countries begin to pay attention to their own semiconductor industries, the semiconductor industry has developed rapidly in recent years, and in 2021, the growth rate of the entire market will reach 26.2%. However, with the impact of global economic issues, trade issues and geopolitical factors this year, the development rate of the semiconductor market has begun to slow down, and the overall increase is expected to be about 4% in 2022, and the overall market size will reach $620 billion.

As global inflation continues to deepen, consumers have begun to reprioritize their disposable spending, including travel, leisure and entertainment expenses, which has also had a certain impact on the semiconductor industry. Recently, a number of market research institutions have begun to warn that the global semiconductor market will begin to grow negatively in 2023, which means that the market will also fall into a state of contraction for the first time after three consecutive years of positive growth.

A number of institutions issued early warnings

Recently, the World Semiconductor Trade Statistics Organization (WSTS), which is composed of the world's major semiconductor manufacturers, released the latest report, which is expected to reduce the semiconductor market size by 4.1% year-on-year to $556.5 billion in 2023, which is not the first time that WSTS has released a forecast report for 2023.

As early as this spring, WSTS predicted that the overall market growth rate in 2023 would be 5.1%, but in August, the organization lowered this forecast to 4.6%, and this time it has lowered its forecast sharply, which can be considered not optimistic about the market next year. It is particularly important to note that WSTS, as a global semiconductor supply and demand trend research institution, includes more than 40 members of global semiconductor companies, such as Samsung Electronics, SK Hynix, TSMC, Micron, etc., which can be regarded as a judgment on the industry as a whole based on the trends of these companies.

Not only WSTS, but also the latest forecast from research firm Gartner shows that global semiconductor revenue is expected to decline by 3.6% in 2023. In this regard, Richard Gordon, vice president of practice at Gartner, said that the short-term outlook for semiconductor revenue has deteriorated, and the rapid deterioration of the global economy and weakening consumer demand will have a negative impact on the semiconductor market in 2023.

At the same time, the semiconductor market has been polarized between consumer-driven and enterprise-driven markets. The weakness in the consumer-driven market is mainly due to inflation and lower disposable income due to rising interest rates, resulting in weak demand for consumer electronics.

Enterprise-driven markets such as enterprise networks, enterprise computing, industrial, medical and commercial transportation are still relatively resilient despite the current macroeconomic slowdown.

Another well-known industry organization, IC Insights, issued a similar view, believing that global semiconductor sales will decline by 5% in 2023. It is also believed that the unfavorable conditions that hindered semiconductor sales in the second half of 2022 are expected to continue until the first half of next year.

IC Insights believes that the main reason for the decline in sales is the current slowdown in global economic growth, weak demand for PCs and smartphones, and the increase in chip inventory, coupled with the continued weakness of the memory integrated circuit market.

Of course, because the semiconductor market is always cyclical, the report believes that after the market decline in 2023, there will be stronger growth in the following three years, and semiconductor sales are expected to climb to $843.6 billion by 2026, with a compound annual growth rate of 6.5%.

Industry analysis

It can be seen from the reports of several institutions that at the beginning of this year, most of them were still optimistic about the semiconductor market in 2023. However, in the context of global macroeconomic impact and weak consumer market demand, various institutions have lowered their expectations to negative growth, and it is obvious that the market is more sluggish than expected, and companies must also be prepared for the decline of the industry.

Overall, the main reason for the decline in semiconductor sales in 2023 is that the memory chip market is facing huge difficulties. On the one hand, the demand for PC and smartphone markets is weak, and the demand for memory is reduced; On the other hand, although the server market is relatively stable, the reduction in investment by related enterprises and the destocking of downstream customers will also affect demand in the second half of the year.

In the third quarter of this year, world-renowned memory chip manufacturers such as Micron, SK Hynix, and Kioxia have successively announced that they will cut capital expenditures or chip production. SK hynix has announced that it will cut its capital expenditure plan by half next year, and Micron, Kioxia and others have said they will cut spending on memory devices by 2 to 30%.

According to a report released by IC Insights, capital expenditure in the semiconductor market is expected to reach $190.4 billion this year, a year-on-year increase of 24%. However, it was recently revised to lower its forecast to 19% and capital expenditure of $181.7 billion. Despite this, the revised capital expenditure forecast is still at an all-time high.

Semiconductor capital expenditure increased by 10% in 2020 and rose sharply by 35% in 2021, and if industry capital expenditure increases by 19% as forecast this year, it means that the industry has seen another three-year double-digit increase in capital expenditure since 1993 to 1995. The main reason for this year's capital expenditure reduction is the weak memory market.

In terms of market size, the memory market is expected to remain stable in 2022 and decline by 16.2% year-on-year in 2023 amid continued weak demand, inflated inventories, and customers begin to lower prices.

Taking DRAM as an example, according to Gartner analysts, global DRAM revenue will decline by 2.6% to $90.5 billion in 2022, and will further decline to 18% in 2023, reducing the market size to $74.2 billion.

The Gartner report also pointed out that in the NAND market, due to the shutdown of many NAND fabs in the first quarter of this year, which raised prices to a certain extent, the rapidly deteriorating demand environment was masked, resulting in excess inventory in the third quarter, which is expected to continue into the first half of 2023. NAND revenue is expected to grow 4.4% to $68.8 billion in 2022, but will decline by 13.7% in 2023, bringing the market size to $59.4 billion.

JPMorgan Chase, Nomura and other world-renowned brokerages also issued warnings that the situation in the memory industry in the first half of next year is not optimistic, and prices will fall sharply, with a decline of 50%. However, Citi analysts believe that although memory shipment growth may slow in the coming quarters, this pessimistic outlook is unlikely to last long. The memory market is expected to reach its lowest point in the first half of 2023 and begin to recover in the second half of 2023.

In addition to memory, sales of logic chips such as display driver chips (DDI) used in smartphones and TVs are expected to decline by 1.2% next year after a rapid growth of 14.5% this year.

However, in addition to the decline in the market such as memory and logic chips, there are also some semiconductor products that can continue to maintain the upward trend. Among them, analog chips are expected to grow by 20.8% this year and are expected to narrow to 1.6% by next year. Other semiconductor products such as discrete devices, sensors, and optoelectronic chips are expected to grow by 2.8%, 3.7%, and 3.7% next year.

brief summary

At present, various institutions have lowered their expectations for next year's semiconductor sales market, on the one hand, due to the continued impact of macroeconomic factors and the decline in consumer demand caused by inflation; on the other hand, due to the continuous high investment in the semiconductor market in the past three years, with the release of production capacity, the market has begun to change from short supply to oversupply, of which the memory market is the most affected. However, some institutions believe that the contraction of the semiconductor market is only temporary, and with the recovery of the market and the development of technology, the semiconductor market will come out of a stronger rise again.