Executive Summary
Annualised growth rates retreated slightly in May, with Total Semiconductors growing 18.2 percent, down from last month’s 22.8 percent and March’s 18.7 percent and, whilst still in double-digit growth terrain, was still sizeably down from August 2024’s 28.5 percent cyclical peak.
Total ICs continued to be the star sector performer, at a healthy 22.9 percent, albeit slightly down from 25.1 percent in April, with Opto at minus 5.5 percent and Discretes at plus 4.8 percent, vs. last month’s plus 16.0 percent and plus 5.5 percent respectively.
Whilst the overall IC market still showed strong double-digit growth, the overall trend is flat, at around the 20 percent level, varying from August 2024’s 36.2 percent peak to January 2025’s 14.8 percent low.
Monthly Annualised SC Growth Rate Trends
(Jan 2019-May 2025 – Percent of US$)
Source: WSTS / Future Horizons
(Jan 2019-May 2025 – Percent of US$)
Source: WSTS / Future Horizons
We still expect to see this trend turn down in the coming months, as per past cyclical patterns, with the only uncertainty being when this will happen.
Market Growth Indicators
The 3/12 curve fell back slightly in May, to 19.8 percent, vs. 20.6 percent in April, 18.8 percent in March and 17.1 percent in February, whilst the 12/12 curve increased to 20.1 percent, up from 19.6 percent in April and March, more in keeping with the curve having reached its traditional cyclical peak.
As a result, the gap between the two curves reversed from last month’s plus 1.0 percentage points to minus 0.3, pushing the growth momentum indicator back into Death Cross territory.
Given the depressed state of the non-AI market sectors, the worsening overall global economic outlook, the still on-going excess inventory and massive overcapacity, April’s excursion into calm waters looks likely a short-lived gain before moving back into the storm, with the length and timing of the transition depending on how much longer the current AI infrastructure boom prevails.
Disaster Waiting To Happen
April’s total CapEx spend as a percent of semiconductor sales was 19.4 percent in April, vs. 22.6 percent and 18.4 percent in March and February respectively. The long-term safe-haven trend is 14 percent.
The equivalent numbers for Wafer Processing (Front-End) Equipment CapEx spend were 16.4 percent, 19.0 percent and 13.0 percent respectively, with the overall trend again well above the 11.0 percent long-term safe-haven trend.
The industry is continuing to stubbornly over-spend on CapEx, with no sign yet of any attempt to cut back, let alone move back below the trend line to compensate for the last two-plus years of excess capacity investment.
The current trend is parallel to the massive over-investment euphoria in the mid-1990’s memory and 2000’s dot.com booms.
We should all know by now how this scenario will end, we just never know when, but past experiences are more often forgotten than learned, allowing irrational exuberance and bad practices to prevail.
Greed always overcomes fear before the whole thing goes ka-boom.
A timely reminder to reflect on Albert Einstein’s quote “Insanity is doing the same thing over again and expecting a different result?”
Malcolm Penn
Read The Full Report Here: https://www.futurehorizons.com/page/137/
