Hope (Hype) vs. Reality?
When Is A Recovery Not A Recovery
When Is A Recovery Not A Recovery
Source: WSTS/Future Horizons
Executive Overview
The current double-digit year-on-year sales growth is being driven by total ICs, with the Opto and Discrete segments both straddling the zero-growth line. These data trends pose a currently imponderable question, namely, “When is a semiconductor recovery not a recovery?”
In his testimony to the Monica Lewinsky grand jury about the rationalization as to why he was not lying, Bill Clinton infamous replied “It depends on what the meaning of the word ‘is’ is.” The same could be said now about the apparent chip market recovery. “It depends on what the meaning of the word ‘recovery’ is”.
Market Detail
2023 ended up down 8.1 percent over 2022, measurably stronger than our minus 10 percent September outlook and minus 22 percent forecast this time last year.
With headlines like this, what exactly is there to be worrying about? Look beneath the surface and the short answer is ‘lots.’
Without wishing to rain on the industry parade, our single biggest concern is that these stellar revenue growth rate numbers are not representative of unit demand, yet it is units we make in our wafer fabs and units our customers buy, not dollars.
When measured in unit terms, Q4-2023 shrank 5.8 percent vs. Q3, with the overall year down 16.6 percent vs. 2022, an awful lot closer to our 22 percent number.
Whilst it’s clearly good to hear the cash register’s cha-ching, that brings small comfort to the industry if the fab lines are not full.
On the bad news front, TI led the way in its Q4 earnings report with TSMC following suit, warning its first quarter 2024 outlook would be down compared to the same period last year. Intel too warned of weaker-than-expected first quarter weakness.
With inventory levels still too high, and unit demand and wafer fab utilization rates too low, as tempting as it might be, it is dangerous to call out a market recovery based solely on the mathematical consequence of year-on-year ASP growth rates.
Malcolm Penn
7 February 2024
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