From overwhelming success to the brink of recession: Semiconductor industry braces for collapse

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From overwhelming success to the brink of recession: Semiconductor industry braces for collapse
from overwhelming success to the brink of recession: semiconductor industry

Who would have thought just a few months ago. The figures leave no room for doubt: the current situation has caught integrated circuit manufacturers with the foot changed. We come from two and a half years during which the demand for chips has skyrocketed as a result, among other factors, of the growth of the personal computer market caused by teleworking and the ever-increasing appetite of the automobile industry.

The big semiconductor manufacturers have been doing great. In fact, as we have been telling you for months, the sustained demand for integrated circuits has been so high that for more than two years they have been unable to provide an answer. And this scenario has caused many of them to opt for face large investments to set up new chip manufacturing plants in the shortest time possible.

Intel, TSMC, Samsung or SMIC are some of the large semiconductor manufacturers that are already building new facilities, and, although they are still necessary, it is possible, against all odds, that in the short and medium term they will not be as necessary as predicted until now the forecasts of the analysts of this market. This unexpected swerve can only have one trigger: the demand for chips is plummeting in some sectors.

The numbers don’t lie: demand is already (unexpectedly) going downhill

It’s been nearly four decades since the last time microprocessor shipments saw such a sharp decline two years in a row. According to Dean McCarron, an analyst at the consulting firm Mercury Research, since 1984 the distribution of microprocessors did not fall so much as it has done during the second quarter of 2022.

Let’s not fool ourselves. Processor manufacturers continue to do well because this market from a global point of view maintains a certain favorable inertia, but this change in trend It worries them. In fact, Intel and NVIDIA have acknowledged that they have already clearly identified a drop in demand for the chips they supply to PC and server integrators.

Intel and NVIDIA have acknowledged that they have already clearly identified a drop in demand for the chips they deliver to PC and server integrators.

Micron Technology, which is one of the biggest manufacturers of memory and SSD drives, has also confirmed that it is receiving fewer orders from data centers, which reportedly represent one of its biggest sources of revenue. And Chinese integrated circuit maker SMIC expects its sales of some chips to plummet as a result of the significant contraction it is experiencing. the smartphone market.

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Some media outlets do not mince words when it comes to describing the mood in the semiconductor industry. Some assure that panic is beginning to spread in this sector, and others choose to moderate the tone by ensuring that chip manufacturers they are on alert and they have decided to severely cut their sales expectations for the coming months.

The uncertainty in the economic field and the cyclical contraction seem to be behind the change in trend of the chip market

In any case, two of the causes that possibly explain the origin of the lurch that this industry has already begun to give are economic uncertainty triggered by the current delicate geostrategic situation, and, on the other hand, the cyclical contraction of the market that usually follows a period of very marked growth. Given the circumstances, it is not easy to predict what will happen in the coming months, but we can be sure that in this context they will not be peaceful.

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Images: TSCM | Intel

| Bloomberg