Global semiconductor revenue could slow down this year, and may even contract in 2023, as weak demand dampens the outlook for personal computer and mobile phone sales. Top IT research firm Gartner Inc is projecting a single-digit chip sales growth of 7.4 per cent in 2022, down sharply from 26.3 per cent in 2021.
“Although chip shortages are abating, the global semiconductor market is entering a period of weakness, which will persist through 2023 when semiconductor revenue is projected to decline 2.5%,” said Richard Gordon, Practice VP at Gartner. “We are already seeing weakness in semiconductor end markets, especially those exposed to consumer spending. Rising inflation, taxes and interest rates, together with higher energy and fuel costs, are putting pressure on consumer disposable income. This is affecting spending on electronic products such as PCs and smartphones.”
Fearing that the world economy could continue to deteriorate, the 2022 projection for semiconductor revenue has been decreased by $36.7 billion to $639.2 billion. For 2023, Gartner expects chip revenue to further contract to $623.1 billion.
"It could easily be a lot worse than that, but it will probably bottom out next year and then start to recover in 2024," Richard Gordon, vice president at Gartner has said.
Higher demand for smartphones and PCs during the pandemic had overwhelmed chip factories, thus leading to shortages in other industries, increasing prices and delaying production.
Following the pandemic-induced surge in 2020 and 2021, PC shipments are now projected to fall by 13.1% in 2022. Smartphone-related revenue from semiconductors is also expected to grow at a slower rate in 2022—3.1% as opposed to 24.5% in 2021.
As millions of cell phones are taken out of the market, this flips the situation into an oversupply and chip pricing tends to fall dramatically, Gordon said.
Against this backdrop of chip shortage, the European Union and the United States have announced major subsidy plans to attract chipmakers like Intel to build factories on their shores, to reduce dependency on Asian suppliers.
While TSMC, the world's largest contract chipmaker, and chip-gear maker ASML have reported strong results, chipmaker Micron had warned of a down cycle.
Some global manufacturers, including Hyundai Motor Co, Nokia and ABB, said they are seeing an easing of shortage.
“The semiconductor market is entering an industry down cycle, which is not new, and has happened many times before,” said Richard Gordon. "While the consumer space will slow down, semiconductor revenue from the data center market will remain resilient (20% growth in 2022) due to continued cloud infrastructure investment. In addition, the automotive electronics segment will continue to record double-digit growth over the next three years as semiconductor content per vehicle will increase due to the transition to electric and autonomous vehicles. The semiconductor content per vehicle is projected to increase from $712 in 2022 to $931 in 2025.”
(With inputs from Reuters)
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