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Semiconductor boom could be coming to an end
The semiconductor market is flattening out after a period of record revenues, according to research outfit Omdia.
The report joins a growing list of warnings that the chip industry is heading for a slowdown because of companies stockpiling components and global economic effects such as inflation.
Omdia’s latest analysis of the worldwide semiconductor market shows that it reached a plateau in the first quarter of 2022 following five straight quarters of record revenues and continual growth in demand.
It appears that the decline is rather modest at present, with a drop of just 0.03 percent compared with the previous quarter. The first quarter of the year is also often a “down quarter,” Omdia said, as demand wanes after the holiday season, with an average decline in previous years of 4.4 percent.
Nevertheless, that slight drop breaks a straight run that saw the semiconductor market set new revenue records every quarter since the beginning of 2020, observed Omdia’s Cliff Leimbach, Senior Research Analyst and author of the company’s Semiconductor Competitive Landscape (CLT) Spotlight Service.
According to Omdia’s analysis, nearly all semiconductor components experienced some small sequential growth between in 1Q22 versus 4Q21, with the exception being CMOS sensors, which declined 16 percent quarter-over-quarter.
Additional factors that Omdia said came into play in the first quarter included: increases in raw material prices globally, putting pressure on inflation; dampening of consumer spending in Q1, particularly for smartphones; plus ongoing impacts of the pandemic in key markets, which have affected the supply chains for smartphones and other electronic products.
Earlier this month, analyst IDC predicted that semiconductor manufacturers were on track for another healthy full year of growth, but also highlighted issues with raw materials needed to manufacture chips that would cause shortages to extend through early 2023.
It also warned that manufacturers building out new capacity could lead to a glut of components and would increase the risk of overcapacity in the industry.
This could now be happening. Research company TrendForce said this week that slower demand for consumer electronics means that DRAM inventories are building up at system vendors and distributors. This in turn means they will not need to buy as much DRAM inventory in the near future, which could see memory prices falling by 3-8 percent in the third quarter, it predicted, despite inflation.
Last month, analysts at Jefferies Group warned that the chip industry is on course for an inventory correction in the second half of 2022 or early 2023. This view was formed by rising inventories in the supply chain in Q1 coupled with slowing demand across multiple industry sectors and a weakened economic backdrop.
Just this week, Nanya Technology, one of Taiwan’s top memory chip manufacturers, warned that its revenue may decline this year owing to a slowdown in demand, according to media reports. The company cited inflation as the cause, depressing spending on consumer electronics, and said this has led to an inventory correction from PC and smartphone companies.
Nanya forecast that the correction is expected to extend into the next quarter and likely to last through the fourth quarter of this year, defying the traditional business pattern for the chip industry where the third quarter is usually a peak season. The Register
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