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Growing consumer demand for electronics, the surge in the adoption of high-end tech devices and affordable pricing on electronics are all driving a growth in the semiconductor market. Even while the sector continues to grapple with worldwide shortages, it’s posting double-digit sales growth.
According to the Semiconductor Industry Association (SIA), worldwide sales of semiconductors totaled $152.5 billion during the second quarter of 2022, an increase of 13.3% over the second quarter of 2021 and 0.5% more than the first quarter of 2022. The organization says global sales for the month of June 2022 were $50.8 billion, a decrease of 1.9% compared to the previous month.
“Global semiconductor sales were robust during the second quarter of 2022, increasing across all major regional markets and product categories compared to the second quarter of last year,” said John Neuffer, president and CEO at SIA, which represents 99% of the US semiconductor industry by revenue and nearly two-thirds of non-U.S. chip makers.
“Market growth has slowed somewhat in recent months, however, with year-to-year growth in June dipping below 15% for the first time since February 2021,” Neuffer added. “Sales into the Americas continued to lead all regional markets in June, increasing by 29.0% year-to-year.”
In addition to the year-to-year sales increase in the Americas, SIA reports that semiconductor sales were up in Japan (16.1%), Europe (12.4%), Asia Pacific/All Other (11.9%) and China (4.7%) during the month of June (compared to June 2021). And, month-to-month sales were down across all regions, including Japan (−0.7%), the Americas (−0.9%), Europe (−1.1%), Asia Pacific/All Other (−2.3%) and China (−2.8%).
The Market May Cool Off Soon
The semiconductor market may see revenues level off in the near future, if Gartner’s predictions are on target. The firm says that global semiconductor revenue is projected to grow 7.4% in 2022, down from 2021 growth of 26.3%. This is down from the previous quarter’s forecast of 13.6% growth in 2022.
“Although chip shortages are abating, the global semiconductor market is entering a period of weakness, which will persist through 2023 when semiconductor revenue is projected to decline 2.5%,” said Gartner Practice VP Richard Gordon. “We are already seeing weakness in semiconductor end markets, especially those exposed to consumer spending. Rising inflation, taxes and interest rates, together with higher energy and fuel costs, are putting pressure on consumer disposable income. This is affecting spending on electronic products such as PCs and smartphones.”
Gartner also says that memory demand and pricing have both softened, and particularly consumer-related areas like PCs and smartphones. These are some of the factors it says will help “lead the slowdown in growth.” From an enterprise perspective, Gartner says inventories are recovering rapidly, lead times are beginning to shorten and prices are starting to weaken.
“The semiconductor market is entering an industry down cycle, which is not new, and has happened many times before,” said Gordon. “While the consumer space will slow down, semiconductor revenue from the data center market will remain resilient for longer (20% growth in 2022) due to continued cloud infrastructure investment.”
Inventories are Accumulating
Individual chip makers are also speaking up about the anticipated slowdown. In a recent Bloomberg article, for example, Samsung warned that the industry could be in for a “rocky close” to 2022 after experiencing extremely high demand over the last few years.
“The general perception earlier this year was that the second half would be better than the first half, but from April to May, it changed drastically,” said Kyung Kyehyun, head of Samsung’s Device Solutions Division, which oversees the company’s semiconductor operations. “The world is changing so quickly.” Samsung plans to build an advanced $17 billion chip plant in Taylor, Tex., with construction slated to start later this year, Bloomberg adds.
In August, chip manufacturers like Micron Technology Inc. Nvidia Corp., Intel Corp. and Advanced Micro Devices Inc. also issued warnings, and primarily concerning weaker export orders. “Signs are rising that trade is already starting to deteriorate,” Bloomberg points out. “Korea’s technology exports slipped in July for the first time in more than two years, with memory chips leading the falls. Semiconductor inventories piled up in June at the fastest pace in more than six years.”
