Electronics

For the global chip industry, which has been struggling in a cramped market environment for nearly a year, Gartner, a renowned information technology research and consulting company, predicts that global chip industry revenue will decrease by about 2.5% in 2023, while the World Semiconductor Trade Statistics Association (WSTS) is even more pessimistic, pointing out that the global chip market size will shrink by 4.1% to $557 billion in 2023. The sluggish market will inevitably be reflected in enterprise investment management. The International Semiconductor Industry Association (SEMI) believes that the global chip industry's capital expenditure in 2023 is only $138.1 billion, a year-on-year decrease of up to 26%. Huacheng Import and Export Data Observation Report.

From 2020 to 2021, when the COVID-19 spread, home office stimulated the huge demand for consumer electronics such as mobile phones, computers and televisions, which led to a sharp increase in chip shipments. Driven and supported by multiple powerful forces such as "core shortage", "price rise" and "demand exceeds supply", the global chip industry entered an abnormal high-speed growth track, recorded a compound annual growth rate of 26.2% that year, and realized an output value of 555.9 billion dollars, And this bullish trend has been maintained in the first quarter of 2022, with 8 consecutive quarters of positive revenue creating the longest sustained growth record for the global chip industry in history, as reported by Huacheng Import and Export Data Observation.

The turning point occurred in the second quarter of 2022. According to data released by market research company Omdia, the global chip market revenue for the quarter was $158.1 billion, a decrease of 1.9% compared to the previous quarter. Subsequently, the revenue for the third quarter converged to $147 billion, a decrease of 7% compared to the previous quarter. In response, the report released by the Semiconductor Industry Association (SIA) of the United States emphasizes that the continuous six month decline in revenue has become the longest sustained slowdown in global chip sales growth since 2018. Although data for the fourth quarter of 2022 has not yet been released, overall, the final sales situation is estimated to be not optimistic. The latest forecast from WSTS is that the global chip market growth rate will slow to 4.4% in 2022, at $580 billion.

The rapid transition from prosperity to decline in the industry has left all chip companies feeling the chill and pain. According to the latest financial report released, in the third quarter of 2022, Samsung Electronics' profit decreased by 31.39%, Intel's net profit sharply decreased by 85%, NVIDIA's net profit decreased by 72%, AMD's net profit plummeted by 93%, SK Hynix's third quarter profit decreased by 60% year-on-year, and Meguiar's net profit decreased by 45%. Under the pressure of a sharp contraction in financial revenue, leading chip manufacturers such as Samsung, LG, and TSMC have slammed on the brakes. Many companies are either passively compressing their annual capital expenditure plans, or have no choice but to "cut orders", or cut salaries and bonus amounts, as reported by Huacheng Import and Export Data Observation.

In fact, based on the two years of strong demand for chips and the market situation of chip supply exceeding demand, the chip manufacturing industry is still at full throttle to increase supply and expand production capacity even after entering 2022; On the demand side, due to the panic and pressure of "shortage of cores", customers have also continued to place repeated and excessive orders in the past year. This feedback to the supply side will inevitably stimulate manufacturers, actively taking collective actions to fill inventory while fully meeting customer order demand. However, when there is a turning point in demand and a contraction occurs, the consequences of the mismatch between supply and demand that misjudges the actual demand in the consumer market will immediately be shown, and inventory backlog becomes a heartache for the entire industry. Huacheng Import and Export Data Observation Report.

Supply and demand determine prices. Inventory hoarding objectively impacts chip prices, and in order to clear inventory, manufacturers in the chip industry are forced to take price reduction actions. However, the price reduction not only caused vicious competition in the industry and a rapid decline in revenue, but more importantly, even under the premise of weak demand and no fundamental improvement, even the price reduction is difficult to achieve the effect of promoting consumption and reducing inventory. At the same time, universal prices are also invisibly strengthening the purchasing choices of downstream and end sellers for on-demand procurement and volume reduction. Correspondingly, the willingness to place orders in advance and stock up has significantly weakened, ultimately forcing upstream suppliers to maintain high inventory levels.

Compared to 2022, the market pressure faced by the global chip industry in 2023 is still not easy. On the one hand, as the global economy enters a downward cycle, the probability of recession in major economies such as Europe and America has increased, and it is still difficult for businesses and individuals to effectively boost consumer demand; On the other hand, inventory digestion and clearance require time, and the situation of chip oversupply is difficult to rewrite in the short term; Moreover, the loosening of industry overcapacity will take more time. Morgan Stanley predicts that global wafer capacity utilization will decline to 70% to 80% in the second quarter of 2023, and it will not recover to 90% until the second half of the year. The existence of the above series of factors will overall weaken market expectations for chip demand. WSTS emphasizes that the global chip market will still have a negative tone in 2023, as reported by Huacheng Import and Export Data Observation.