Semiconductor sales reached their highest level last year despite witnessing a slowdown during the year’s second half. The slowdown was primarily due to the decline in demand from the end-user markets because of macroeconomic headwinds.
According to Gartner, global semiconductor revenues will decline 11.2% in 2023. Popular chipmaker Taiwan Semiconductor Manufacturing Company Limited (TSM) is also witnessing a slowdown in demand. According to sources, the company, to control costs, has asked its major suppliers to delay the delivery of chipmaking equipment.
Although the long-term growth prospects of the semiconductor industry look bright, the near-term headwinds will continue to put pressure on the chip industry in the short term. Gartner’s Practice VP Richard Gordon said, “As economic headwinds persist, weak end-market electronics demand is spreading from consumers to businesses, creating an uncertain investment environment.”
“In addition, an oversupply of chips, which is elevating inventories and reducing chip prices, is accelerating the decline of the semiconductor market this year,” he added. In July, TSM, a major supplier to smartphone giant Apple Inc. (AAPL), forecasted that it would witness a 10% drop in sales in 2023, and its investment spending would be at the lower end of its estimate of $32 billion and $36 billion.
TSM CEO C.C. Wei highlighted that the decline in demand would be mostly due to a tepid recovery in China, soft demand in the end market, and a weak global economic scenario. Although the demand for artificial intelligence (AI) chips is likely to remain strong, it is unlikely to offset the softer demand in the end markets due to declining sales of smartphones, personal computers, laptops, etc.
Degroof Petercam’s analyst Michael Roeg said, “There has been a lot of excitement about artificial intelligence and the implications for the semiconductor industry. However, the strength in demand for AI chips is not strong enough to compensate (for) what is happening in other segments.”
After global demand for consumer electronics spiked during the pandemic, companies had stockpiled chips to meet the high demand. However, as the demand slowed down in the end markets due to high inflation, companies were stuck with excess inventories, and this led to a fall in the demand for chips, followed by a decline in their prices.
TSM’s CFO Wendell Huang said, “Moving into the third quarter 2023, we expect our business to be supported by the strong ramp of our 3-nanomenter technologies, partially offset by customers’ continued inventory adjustment.”
AAPL, a major TSM customer, announced its latest iPhone series with the cutting-edge 3-nanometer chip but did not raise prices, indicating softness in the smartphone market. AAPL is currently facing trouble in a key market like China as the Chinese government banned some government employees from using iPhones at work.
Furthermore, smartphone maker Huawei came up with the Mate 60 series, which utilizes an advanced chip made by Chinese chipmaker SMIC. All these factors might put pressure on iPhone sales this year, piling further pressure on TSM.
Moreover, TSM is facing delays at its Arizona plant. The company was forced to…
Continue reading at INO.com
