The Chip Insider®– Happenings, Comments, Questions & Answers

Happenings, Comments, Questions & Answers:

How much longer do you think this downturn will last? Actually, the downturn has been over for some time. It just doesn't feel that way, because … Perceptions lag market turns by 6 to 12 months ... call it recognition latency. TechInsights' high-frequency data in Semiconductor Analytics show sales hit bottom the week ending Dec 30, 2022. A couple of weeks later, everyone was running around with their hair on fire at SEMI ISS in Half Moon Bay. Some were forecasting chip sales declining more than 20%... Anyway, currently we're at the chip market being down this year by just over 10%, similar to 2019's mild cycle. It should reverse to up in 2024. Equipment will be down by less than 5% this year, versus a downturn average of -38% in the period between 2000 and 2010. It too should also reverse up next year. – Dan

How concerned are you that all this Chips Act funding will resort to overfunding? I am not too concerned, due to structural changes such as … as well as the re-globalization of manufacturing. The problem … – Dan

In early 2023, bloated inventories drove decreased device production, especially in memory. Are we still working off inventory? Yes … The big problem with this cycle was inventory control (see above… All the safeties were taken off. These were the safeties that kept the cycle modulated after the disasters of 2000/2001 and 2008/2009... Discounting only robs future sales to deal with current cash flow problems. Once it's over, you know conditions are in balance. Auto chip shortage is pretty much over. – Dan

How has geopolitics between US and China impacted the silicon cycle? China's decoupling of its semiconductor industry has helped moderate the cycle, as it is expanding. Especially when it comes to manufacturing essential chips for products like EVs. It leads the EV market and is headed to a leadership position in essential chips, given its current spend... With almost three quarters in, China's wafer fab equipment buys should amount to $33B in 2023, compared to a WFE market of $95B… The only question is if they can get their capital productivity up. – Dan

How closely is the economy tied to semiconductors and how concerned are you about the macroeconomic downturn? I’m more concerned about the macroeconomy… ... I put myself in the camp that believes that with inflation steadily dropping the Fed is done with rate hikes… worry about the declines in the Money Supply and the Fed’s Balance Sheet... – Dan

What about China? China is in the midst of a structural growth decline… While companies want to sell there, it’s far more difficult than the go-go 90s. – Dan

* Text in italics are my answers, interpretations, as well as opinions on the strategic importance where relevant.

ITPC and the path to $1T: “It’s Déjà vu all over again” – Yogi Berra

Notably at this year’s recent ITPC, IBS’s Handel Jones, who was first to forecast the semiconductor industry would pass $1T by 2030’ revised his projection to 2033…

“Forecasting is difficult… Especially when it's about the future” – Yogi Berra