The chip industry may usher in a “hard landing” at the end of this year

Prepare now for the inevitable recession. “The chip market is at a turning point and may collapse in the fourth quarter of 2022, or it will be overshadowed by a seasonal downturn. Last year, the world faced The chip shortage problem, according to the estimates of many major manufacturers, the chip shortage problem may not be relieved until the second half of the year at the earliest.

According to foreign media eeNews reports, Penn predicts that the IC market growth trend may continue into the first three quarters of 2022, and drive the annual market growth of 10%, creating a semiconductor market worth 609 billion US dollars. If lucky enough to extend this trend into 2023, the annual growth rate in 2022 will be 14%, but if the market turns early, the growth rate in 2022 may be as low as 4%.

Penn’s forecast is slightly lower than IC Insights’ recent forecast of an 11% increase in global IC sales this year, but higher than the 8.8% forecast by the Global Semiconductor Trade Statistics Organization for the fall of 2021.

The chip industry’s 17th recession is coming
Penn also pointed out that don’t be surprised if the market sees negative growth. In cycles, this happens quite often. The chip industry’s 17th recession is coming. The chip market is not driven by 5G, AI or other products, it is driven by cycles, and cycles are caused by imbalances in supply and demand. Demand is short-term and can change rapidly, supply changes very slowly, taking 18 months to 2 years.

He warned that plans to build capacity in the U.S., Japan, Europe and elsewhere could focus on mature processes, creating excess capacity in 2023 and 2024, and beyond. Capex as a percentage of sales in the second half of 2021 was 75% higher than the long-term average, which could lead to excess capacity as demand retreats. Current demand includes double ordering and a market inflated by rising average selling prices, when companies start to consume inventory, orders will dry up and ASPs will fall.

However, IC Insights believes that the IC market is still very resilient, experiencing a sharp decline of -15% in 2019, and the global new crown pneumonia in the first half of 2020, making the market struggling with severe economic uncertainty. At the same time, the pandemic has led to changes in people’s lifestyles, with individuals, businesses, educators and governments increasingly turning to the digital economy, which also provides a catalyst for strong growth in IC sales in the second half of 2020 and into 2021.

Positive outlook for EDA market
Penn pointed out that the technology-leading wafer foundry TSMC is still based in Taiwan, and its overseas investment is lagging behind the production capacity of advanced processes. He believes that TSMC is a model for the chip market, but other companies are entering this market aggressively. These companies may not be as successful. At the same time, China is also building its own capacity to reduce chip imports.

What sets TSMC apart, Penn said, is that it no longer builds speculative capacity, largely based on pre-allocated demand, or even demand that has already been paid for.

Penn did find a market with a bullish outlook, though. EDA (Electronic Design Automation) is benefiting from the growing number of companies that have integrated supply chain capabilities and develop their own chips. , the market grew 17% in the third quarter of 2021. Penn believes that all these companies like Google, Facebook, Amazon, Tesla are likely to maintain this growth trend.