On 29 November, the World Semiconductor Trade Statistics (WSTS), an organisation made up of major semiconductor manufacturers, released its forecast that the semiconductor market will decrease by 4.1% year-on-year to US$556.5 billion in 2023. This is an abrupt turnaround from the previous forecast (4.6% year-on-year growth), which showed negative growth after four years. Demand for semiconductors for consumer products such as smartphones and personal computers is falling, and the market for storage semiconductors "memory" is also expected to decline significantly.
In the spring of this year, the World Semiconductor Trade Statistics Organisation forecast a market growth rate of 5.1 per cent for 2023, but this was revised downwards to 4.6 per cent in August. This is a further significant drop compared to the last revised forecast. This is the first time in four years since 2019 that memory market conditions deteriorated rapidly before the new crown epidemic that it has been below the previous year.
The largest decline in 2023 will be in memory, which accounts for more than 20% of the market, and is expected to be 17% lower than in 2022. In terms of regions, Asia Pacific is expected to experience negative growth of 7.5%. Japan, the US and Europe will grow positively, but the market shrinks more, centred on China. the market size in 2022 is forecast to be US$580.1 billion, up 4.4% from 2020.
There is a rapid oversupply of chips. This is because actual demand from smartphones and personal computers (PCs), for example, is declining, while the inventory held by the companies concerned is turning into a surplus, reducing purchases. The decline in the semiconductor market in 2023 may be even more pronounced than in 2019, when the chip recession last went into negative growth.
Inventories of companies that purchase chips and manufacture smartphones and PCs, among others, are growing.
Looking at the inventories of five Taiwanese electronic manufacturing services (EMS) providers, including PEGATRON United Technologies, the increase was maintained in 2022. reaching a total of 2.1 months of trading at the end of June, 0.8 months higher than the average for 2019.
Companies have been adding to their inventories due to supply chain disruptions caused by the new crown epidemic and a recovery in demand. However, the current slowdown in demand has started to curb the increase in inventories, reducing stock levels to 1.8 months at the end of September.
Inventories held by the market and companies have increased and there are signs of excess supply of semiconductors. In particular, widely used memory chips are vulnerable.
Large manufacturers have started to curb production due to the oversupply. Micron Technology in the US announced a 20% overall production cut in memory chips, and Armor Man Corporation announced a 30% production cut in NAND-based memory chips.
De-stocking is expected to take a long time and downward pressure on prices continues. According to Kazuhiro Sugiyama of UK-based research firm Omdia, "inventories are higher than in 2019 (when the chip recession hit) and the rate of decline will increase accordingly", suggesting that the deteriorating market situation will continue into the first half of 2023.
Demand for chips such as industrial equipment and automobiles is strong due to the supply shortage caused by the epidemic, but looking at the semiconductor market as a whole, signs of oversupply are strengthening.
Against the backdrop of the epidemic and subsequent government subsidies, among other things, various semiconductor companies have initiated large-scale investments. By around 2024, when preparations for mass production are actually completed, semiconductor production capacity is expected to increase significantly. Companies that use semiconductors are also increasing their purchases of semiconductors in the long term against the backdrop of increased data flow, etc. However, if the stagnation in demand persists for a long time, there is a possibility that supply capacity may temporarily become surplus.