MENU



Penn was speaking in an online conference where he provided his forecast for the global chip market in 2022. His analysis is that the market momentum is at a turning point with a collapse likely to hit in the 4Q22, possibly masked by the normally seasonal downturn. Penn’s mid-range estimate is for 10 percent annual growth in 2022.

Penn’s mid-range prediction is just below IC Insights forecast of 10.8 percent growth (see Semiconductor market to rise 10.8 percent in 2022) but ahead of the 8.8 percent growth figure given by World Semiconductor Trade Statistics in fall 2021 (see Global chip market to be worth $600 billion in 2022).

Meanwhile plans to build capacity in mulitple regions – US, Japan, Europe – is likely to be focused behind the leading-edge and give rise to overcapacity in 2023 and 2024 and possibly further into the future, Penn warned.

Penn observed that spike in the front-end capital expenditure in 2H21 was 75 percent above the long-term average as a percentage of sales.That is likely to give rise to overcapacity as demand settles back. Current demand includes double-ordering and markets inflated by increasing average selling prices, Penn said. When companies start burning off inventory orders will dry up and ASPs will reduce, he added.

Penn pointed out that the leading foundry, Taiwan Semiconductor Manufacturing Co. Ltd., remains committed to Taiwan and is only installing capacity overseas that will behind the leading edge when it comes on stream. Penn said he considers TSMC to be an exemplary performer in the chip market, but that others are piling in and may not be so successful, and at the same time China is building its own capacity to reduce chip imports.

Next: Building pre-assigned capacity


One thing that marks TSMC out is that they no-longer build speculative capacity, Penn said. The company is largely building to pre-assigned demand, even to previously paid-for demand. “TSMC is currently building two 3nm fabs in Taiwan; one for Apple and one for Intel. The on-shore capacity will be at N-minus-2,” he said indicating a couple of manufacturing nodes behind the leading edge. “On-shoring production is the biggest post-crash recovery risk. They will be building yesterday’s products tomorrow,” Penn said.

Penn estimates that residual market strength will likely last through the first three quarters of 2022 and give rise to a 10 percent annual market growth to create a semiconductor market worth US$609 billion. If the turn in the market is delayed into 2023 the annual growth in 2022 could be high as 14 percent. If the turn comes early, the 2022 growth could be as low as 4 percent, Penn said.

Speaking of gross domestic product forecast figures from the International Monetary Fund Penn said: “Overall the balance of growth risk is tilted to the downside.” 

He added: “Don’t be surprised if [chip] market growth goes negative. It often does during these cycles.”

“The 17th [chip market] downturn is on its way. The chip market is not driven by 5G, AI or other sexy stuff. We’ve always done things like that. It is driven by cyclicality. And that is driven by the mismatch between supply and demand. Demand is short-term and turns on a dime. Supply is very slow to change and takes 18 months to two years to do so.”

Penn did find one market with a strong outlook. EDA software licensing is benefitting from the increasing numbers of companies aggregating supply chain capabilities and that are determined to develop their own chips. “A general shift to an OEM direct business model is promoting EDA growth,”‘ said Penn.

The market was up 17 percent in the 3Q21, according to the Electronic System Design Alliance industry body (see Boom for SiP design tools). “All these OEM direct customers: Google, Facebook, Amazon, Tesla are likely to keep that going,” he said.

Related links and articles:

www.futurehorizons.com

News articles:

Boom for SiP design tools

Fateful Choices For ICs and Taiwan

Semiconductor market to rise 10.8 percent in 2022

Global chip market to be worth $600 billion in 2022.

Opinion: Time for Europe to wake from a 30-year slumber

Germany ready to help Europe invest ‘billions’ in chip manufacturing

If you enjoyed this article, you will like the following ones: don't miss them by subscribing to :    eeNews on Google News

Share:

Linked Articles
10s