One of the topics of discussion in the New Year is of course the chip shortage and the flood of cash for new semiconductor capacity. The largest chipmakers have invested more than $450 billion in new capacity expansions, slightly less than the $464 billion worth of the industry as a whole in 2020.
Will this lead to overcapacity and collapse in the semiconductor market, as we have seen in previous industry cycles and as IDC predicts?
Not so, optimists say, this is a new era. Some forecasts suggest the semiconductor market will reach $800 billion by 2028 and $1 trillion by 2032.
They point out that past cycles were driven by a single killer app, such as PCs, cell phones, internet infrastructure, tablets and smartphones in the early 1980s. When these markets become saturated, there is a dramatic shift in supply and demand, and the markets plummet, leading to declines.
But they say the cycle is different today because there isn't one killer app acting as a catalyst, instead we have multiple market growth events happening at the same time, many interdependent, all contributing to the rapid growth of TAM growth.
To that end, they argue, these markets are unlikely to decline at the same time. In other words, the growth of the semiconductor market.
"I really don't believe we can predict future semiconductor TAM by looking at past cycles, we are in a unique market not just because of the pandemic, but because of the ubiquitous spread of semiconductors to every part of life and end products On the one hand I can only imagine that this will increase rather than decrease in the future," said one knowledgeable commentator.
The pandemic has driven a surge in people working from home, which has greatly accelerated the medical and telecom markets, but hit the auto industry in the short term, not because of semiconductors themselves, but because of management decisions in the auto industry when the pandemic hit .
Optimists do concede that it may not be all smooth sailing and that there may be some volatility in the industry's growth rate and curve over the next decade, but the underlying trend for the semiconductor industry over the next 10 years will be a massive 5% growth year.
"I don't think we can continue to use the historical trends of our industry to predict the future, we are entering a whole new era, and I think we should all open up to all kinds of exciting new opportunities and possibilities," said a dealer Business said.
This is perhaps supported by the increasing proportion of electronics in electronic devices, which will reach a record 33% in 2021 and reach a record $680 billion market in 2021.
However, we've heard of this before. Just before the semiconductor market collapsed in 2000, the rise of multimedia and digital television led market researchers to similarly declare it a game-changing new era.
What matters are those "troughs" and "flashes." No one thinks the semiconductor market will collapse because it is a fundamental part of the global economy, the "new oil."
But the balance of capacity and demand is never precisely aligned, and the chances of that happening are slim to none. Much of the investment is in large 300mm fabs in 5nm and 3nm process technologies, costing $20 billion each, making capacity a step function rather than a steady state. These fabs need to remain in full production, and global fab inefficiencies are likely to lead to duplication and severe overcapacity.
There is also political uncertainty, with various CHIPS bills aimed at subsidizing new "sovereign" capacity in the US and Europe, which could distort markets and create inefficiencies.
The extra capacity will drive down average selling prices (ASP), agrees industry veteran Malcolm Penn, founder of Future Horizons, who accurately predicted the current "supercycle." While we will eventually need the capacity growth promised for the industry today, "it's a situation where it's too late to trigger a near-term oversupply," he said. He also noted that demand and capacity will be out of balance, with some demand occurring in areas without capacity investment.
"We were the only analyst who correctly predicted the 2021 supercycle and 25% growth and why, and our IFS2021 forecast was +18% and +24% upside," he said. "All the other analysts at the time were our forecasts. half, SemiWiki casts us as 'always optimistic' in their industry outlook report. Based on our 55+ years of direct industry experience, our forecasts have proven to be more accurate than any other analyst and most industry executives. Be long. We’re never afraid to take a contrarian view and are backed by data and a robust analytical process, which is why our industry forecasts consistently prove to be both accurate and insightful, second to none.”
Hopes for a new era of steady growth in the semiconductor industry are not optimism but a failure to learn from the past. Average growth over the next decade certainly has the potential to reach a trillion-dollar market. Changes in the market will make this difficult.
