Well-known analysts: Chip market fastest Q4 crash No soft landing

Image source: eeNews

JiWei network news, "Now prepare for the inevitable recession." Malcolm Penn, CEO of analytics firm Future Horizons and a well-known analyst, predicted at an online meeting recently that the chip market is at a turning point that could collapse in the fourth quarter of 2022 or be overshadowed by seasonal downturns.

According to eeNews, Penn forecasts a 10% growth rate for the chip market for the full year of 2022, slightly lower than IC Insights' forecast of 10.8%, but higher than the 8.8% forecast by the Global Semiconductor Trade Statistics Organization in the fall of 2021. Penn warned that plans to build capacity in the U.S., Japan, Europe and elsewhere could focus on mature processes that could create overcapacity in 2023 and 2024, or even longer.

According to Penn, front-track capex as a percentage of sales in the second half of 2021 is 75 percent higher than the long-term average, which could lead to overcapacity as demand falls. According to its analysis, current demand includes double-ordering and a market that has ballooned due to rising average selling prices. When businesses start consuming inventory, orders will dry up and ASP will drop.

Penn pointed out that the home base of the leading foundry TSMC will still be Taiwan, which only lags behind the production capacity of advanced processes once it is installed overseas. He sees TSMC as a model for the chip market, but other companies are making a big splash into that market and these companies may not be as successful. At the same time, Chinese mainland are also building their own production capacity to reduce chip imports.

Penn said that what sets TSMC apart is that it no longer builds speculative capacity, but is largely based on pre-allocated demand, or even paid demand. "TSMC is currently building two 3nm fabs in Taiwan, one for Apple and one for Intel, with on-shore capacity going to be N-2," he said, pointing to several manufacturing nodes behind the advanced process. "Onshore production is the biggest risk to recovery after the crisis. They will produce yesterday's products tomorrow. ”

Penn estimates that the market upward trend is likely to continue into the first three quarters of 2022 and bring 10% market growth for the whole year, creating a $609 billion semiconductor market. If we are fortunate enough to extend this trend until 2023, the annual growth rate will reach 14% in 2022. But if the market shift comes early, growth could be as low as 4 percent in 2022.

"Don't be surprised if there is negative growth in market growth. This happens often during cycles. The seventeenth recession in the chip industry is coming. The chip market isn't driven by 5G, AI, or anything else sexy. It is cycle-driven. And the cycle is caused by a mismatch between supply and demand. Demand is short-term and can change rapidly. Supply changes are very slow, taking 18 months to two years. ”

Penn did, though, find a market with optimistic prospects. EDA is benefiting from a growing number of companies with integrated supply chain capabilities and determination to develop their own chips. "The sweeping shift to an OEM direct business model is driving EDA's growth." According to industry body Electronic System Design Alliance, the market grew by 17% in the third quarter of 2021. Penn argues, "All of these companies— Google, Facebook, Amazon, Tesla— are likely to maintain this momentum." (Proofreading/Jenny)