According to semiengineering reports, the chip market will continue to grow in the next few years, but not as fast as in the past few years.
Working from home at the time had driven demand for chips for everything from laptops to TVs to home video equipment, and now demand has slowed temporarily.
Economists painted a mixed picture for the semiconductor industry at the SEMI Industry Strategy Symposium at the beginning of the month, with all major markets expected to continue to grow, buoyed by the return of people to work, saturated demand for certain products, and a shift in demand for certain products. The impact of persistent shortages dragging down performance.
Digging deeper into the chip industry, supply chain disruptions are expected to persist for at least the next few years. The good news is that there are enough segments and enough demand to withstand some bigger economic shocks. According to Michael Yang, senior director of semiconductors at Omdia, the chip industry is estimated to have grown by 36% from 2019 to 2021.
"Every segment, every company in the semiconductor industry benefits," Yang said. “Nine of the top 10 companies achieved double-digit revenue growth, and some companies saw revenue growth of 30% year-over-year. Of the 247 companies it tracks, 145 saw revenue growth of more than 20%. A good year for two main reasons. First, revenue is a function of demand and ASP, and we are seeing a significant increase in demand. During the pandemic, consumer behavior has changed a lot, leading to massive shortages of various semiconductor components , the average selling price has risen.”
Between 2019 and 2021, the chip industry grew 46% to a record high. Demand for smartphones, PCs and large-screen TVs has declined since then, but Yang said the industry as a whole remains strong, in part because chips are used in many different industries today. He noted, for example, that in California, all new lawnmowers sold must be electric, not gasoline-powered, which requires chips. The same is true for new car designs that are increasingly electrified.
Still, the industry is bucking the current when it comes to raw materials. SEMI analyst Inna Skvortsova pointed to a number of areas that will be impacted by capacity and material shortages.
"Ironically, semiconductor shortages are now hitting chipmakers and causing longer lead times for the equipment needed to make chips," Skvortsova said. "One chip allocated to a device maker could lead to 100,000 chips per year for other markets."
Despite the shortage, she said semiconductor sales will top $600 billion this year, down from 26% year-over-year growth in 2021. Despite limited capacity, material sales are moving higher. Despite unrealized growth due to limited supply of everything from silicon wafers to photoresists and packaging materials, trend lines continue to increase across all manufacturing segments.
In terms of fab capacity, Skvortsova said there are 75 ongoing fab construction projects in 2022, with 62 planned for 2023. 28 new volume fabs will begin construction in 2022, including 23 300mm fabs and five 200mm and below fabs. Fabs take years to build.
In terms of production capacity:
300mm production capacity will increase by 10% in 2021, 11% in 2022, 8% in 2023, and 9% in 2024;
200mm production capacity will increase by 6% in 2021, 5% in 2022, 3% in 2023, and 2% in 2024;
Memory capacity will increase by 7% in 2022, 3% in 2023, and 5% in 2024;
Power-related capacity will grow 12% in 2022, 8% in 2023, and 8% in 2024.
"The industry outlook is quite strong and optimistic," Skvortsova said. “Semiconductor is expected to show very strong and healthy growth through 2022 – at least in the high single digits. The semiconductor materials and equipment markets are also expected to outpace the previous year’s performance, all at record highs. However, all of this potential is not without some uncertainty. Supply chain challenges remain. Inflation from increased raw material and transportation costs could adversely affect these targets.”
However, it is evident from these and other presentations that economists and market analysts continue to be optimistic about the chip industry for years to come. Exact numbers will vary, and economists agree that nothing is certain. But at this point, the graph is still pointing in the right direction, even if it's not the COVID-induced peak in 2020 and 2021.
