Computer chips – from shortage to oversupply
The short-term market for semiconductors has changed dramatically. After years discussing how to increase production to satisfy markets, a new forecast says oversupply becomes inevitable with the worsening economic situation.
Global semiconductor revenue will decline 3.6% next year. In 2022, the market is on pace to grow 4% and total $618 billion, according to marketing and research firm Gartner.
“The short-term outlook for semiconductor revenue has worsened,” says Richard Gordon, Practice Vice President at Gartner. “Rapid deterioration in the global economy and weakening consumer demand will negatively impact the semiconductor market in 2023.”
Global semiconductor revenue is forecast to total $596 billion in 2023, down from the previous forecast of $623 billion.
The company says semiconductor market is polarized between the consumer-driven markets and enterprise-driven markets.
“Weakness in the consumer-driven markets is being driven largely by the decline in disposable income caused by rising inflation and interest rates, but also by the reprioritization of consumer discretionary spending to other areas such as travel, leisure and entertainment, which are having a negative knock-on effect on technology purchases.”
“On the other hand, the enterprise-driven markets, such as enterprise networking, enterprise compute, industrial, medical and commercial transportation, have, so far, been relatively resilient despite looming macro-economic slowdown and geopolitical concerns.”
“The relative strength in the enterprise-driven markets comes from strategic investments by corporations that are looking to strengthen their infrastructure to continue supporting their work from home workforce, business expansion plans and ongoing digitalization strategies,” says Gordon.
Gartner predicts that “for the remainder of 2022, the memory market is witnessing faltering demand, swollen inventories and customers pressing for considerably lower prices. As a result, the memory market will remain flat in 2022 and is forecast to decline 16.2% in revenue in 2023.”
“The worsening economic outlook is negatively impacting smartphone, PC and consumer electronics production which is positioning the DRAM(dynamic random access memory) market for oversupply for the remainder of 2022 and the first three quarters of 2023. Gartner analysts foresee DRAM revenue to decrease 2.6% to reach $90.5 billion in 2022 and will further decline 18% in 2023, to total $74.2 billion.
The NAND fab (flash memory) outage which occurred in the first quarter of 2022 increased prices and masked the rapidly deteriorating demand environment, resulting in excess inventory in the third quarter of 2022 which is expected to carry into the first half of 2023. NAND revenue is projected to increase 4.4% to $68.8 billion in 2022, but it is on pace to decline 13.7% in 2023 to $59.4 billion.
“While the deterioration in the macroeconomic environment will weaken consumer demand, we expect relatively better semiconductor consumption from business investments. Consequently, markets such as industrial, telecom infrastructure and data center will be less impacted by consumer sentiment and spending in the short term,” said Gordon.
A year ago, Gartner said global business operations were disrupted by shortages of key goods such as semiconductors.
In February 2022, the EU commission presented the proposal for European Union Chips Act including tools for anticipating and responding to semiconductors shortages and crises to ensure security of supply.
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