Electrical Equipment / Components & Telecoms

According to a report on the Japan Economic website on July 15, the semiconductor market, which has been hot for two years due to a shortage of supply, has begun to change. Inventories of dynamic random access memory (DRAM), a representative semiconductor, increased after this spring, and prices plummeted by more than 30%.

In Taiwan, China, the global semiconductor production center, vigilance is spreading rapidly. An executive of a major Taiwanese semiconductor manufacturer said: "The recent semiconductor shortage seems to be an illusion. We started to adjust the inventory in April and it is still going on. The reasonable inventory is 2 months, and now it is more than 3 months."

From the perspective of the entire industry, not only the situation facing storage semiconductor DRAM is severe, but the impact also spreads to the field of old-fashioned general-purpose semiconductors used in home appliances and computers. An executive of a semiconductor manufacturer in Taiwan said: "The production of companies purchasing semiconductors has declined across the board. More and more companies are canceling semiconductor orders, and the market direction has undoubtedly changed."

Changes in the market can also be seen from the recent monthly sales of large semiconductor companies in Taiwan. For example, Novatek, which produces semiconductors for liquid crystal displays and other products, achieved double-digit sales growth in April compared with the same period last year, but it turned to decline in May, and its performance in June deteriorated further, with a sharp drop of 29.6%.

In the past two years, the global semiconductor market has achieved substantial growth not seen in recent times. The opportunity for this is the expansion of the new crown epidemic, and telecommuting and online teaching have become popular around the world. Represented by personal computers, smartphones, game consoles, etc., the demand for online at home is rapidly expanding. Large-scale information technology companies in China and the United States also continue to add servers. According to data from the World Semiconductor Trade Statistics Association, the global semiconductor market will increase by 26% year-on-year in 2021, reaching US$555.8 billion, showing an "unprecedented" growth rate and setting a record high.

However, the characteristics of the semiconductor market are that it is very sensitive to economic trends and fluctuates greatly. It is not uncommon for a market to turn weak for some reason, even after a long period of good performance, to have an unstoppable abrupt change.

Semiconductors are a leading indicator of the economic situation as everything from appliances, cars, and smartphones to military and space-related uses require semiconductors. Generally speaking, the lead time for semiconductors is about 3 months from order placement to delivery. Therefore, if the semiconductor market is currently weak, then it can be assumed that the economy will decline in 3 months.

The stock prices of large semiconductor companies TSMC, Intel, and Samsung Electronics have all dropped by about 30% compared with the beginning of the year, while Nvidia’s stock price has dropped by half. Big information technology companies such as Apple are set to report quarterly earnings, and companies that consume a lot of semiconductors are thought to already face barriers to growth.