Electronics

Not long ago, the global semiconductor industry faced skyrocketing demand and a chip supply crisis. However, with the passage of time, the days of the semiconductor industry have taken a turn for the worse, and analysts have said that they "can't understand".

As the editor previously reported, at present, in the fields of memory chips, personal computer processors and other chips, there is a rapid oversupply, but at the same time, in the fields of automotive chips and industrial chips, semiconductor manufacturers have not been able to satisfy customers and establish stable chip supply.

In this regard, Hutchison, a senior expert of the semiconductor industry research company "VLSI Research Company", said that the sharp turn in the semiconductor market this time, as well as the joint application of various contradictory forces to the market, this situation is unprecedented. Supply is in short supply, and on the other side is a large amount of chip inventory.

Recalling the first quarter of 2022, the continuous growth trend of the semiconductor industry was broken, and the growth rate of the global semiconductor market fell for the first time since the first quarter of 2020. At the same time, many institutions and media indicated that the risk of excess is also rising.

According to Omdia data, the global semiconductor market declined by 0.03% in the first quarter compared to the previous quarter. This means that "after five consecutive quarters of record revenue and continued growth, the red-hot semiconductor market has entered a relatively stable period in the first quarter of 2022".

It is reported that the direct cause of the weakness this time is that the semiconductor supply chain has experienced a large increase in inventories since the beginning of this year. For example, in February, semiconductor manufacturers' inventory of chips can support 1.2 months of downstream production consumption. In June, global inventory increased to the equivalent of 1.4 months of consumption, and it increased to 1.7 months in July. Fundamentally, consumers are keeping their wallets tight, and global PC and smartphone sales have shrunk dramatically.

From the outside, although there has been an early warning of market stabilization, the exact signal of this round of weak demand appeared in July. At that time, the US semiconductor giant Intel announced a piece of news that shocked Wall Street analysts: Intel's operating income in the second quarter was 2.6 billion US dollars, 15% less than analysts' expectations. The poor performance was due to a "once in a decade" inventory adjustment in the semiconductor industry, as well as Intel's own operating problems.

On the other hand, Nvidia forecasted a performance message last week that sales of gaming chips would plummet 44% from the previous quarter. The company mainly produces graphics processors for video equipment or artificial intelligence machine learning systems; Micron Technology is one of the world's major memory chip makers. Free cash flow could be negative in the coming quarter, the company said.

From the perspective of capacity expansion, many semiconductor companies in the United States planned to expand their local production facilities in the past, but the sharp downturn in the market forced them to reconsider their expansion plans. Intel announced that capital expenditures for the rest of the year will be reduced by $4 billion; Micron Technology has said that it will invest $40 billion in the United States by 2030. But then, the company corrected itself, saying it would make massive capital spending cuts next year due to weaker markets.

Overall, the sharp weakness this time around has prompted several U.S. semiconductor giants to cut billions of dollars in capital spending plans.

The key point is that today's latest news from Sina Technology shows that there are signs that the scope of weakness in semiconductors is expanding. It is reported that Micron Technology industrial companies and automakers have become the latest customers to cut chip orders. However, it is not yet possible to judge whether these customers are making adjustments because their previous purchases were too high, or whether they were forced to cut orders because of the decline in demand from their own downstream customers.

In other words, due to complex factors, in the current weak semiconductor market, it is difficult to analyze whether it is because of continuous supply chain problems or the collapse in demand from downstream customers.

Obviously, in the past two years, the semiconductor industry has experienced serious inventory, followed by a shortage of supply. Many analysts have not dared to confidently judge how the economic slowdown will affect the semiconductor industry as in the past. Some analysts had hoped that the decline in semiconductors would be concentrated in PCs and smartphones, but that hope has been crushed by reality.

Regardless, the above are clear signs of weak demand. While most semiconductor experts are currently predicting that the weakness this time around will not be much, as the global economy in general is heading for a soft landing. However, the rapid changes in some market factors have caused the industry to consider various complex factors that interact with each other.