Steep Decline in 1Q 2023

The global semiconductor market dropped 8.7% in 1st quarter 2023 versus 4th quarter 2022, according to WSTS. This was the steepest quarter-to-quarter decline since a 14.7% drop in 1Q 2019. 1Q 2023 was down 21.3% from a year earlier, the largest year-to-year decline in thirteen years since a 30.4% drop in 1Q 2009. Revenues of the top fifteen semiconductor companies reflect this weakness, with a weighted average revenue decline of 12% in 1Q 2023 from 4Q 2022.

The hardest hit were the memory companies (Samsung, SK Hynix, and Micron Technology) which collectively dropped 26%. The sharpest falloffs of the non-memory companies were Intel (down 17%) and MediaTek (down 12%). Collectively, the 12 non-memory companies declined 7%. Four companies managed revenue gains in 1Q23 versus 4Q22. Nvidia has not reported its equivalent 1Q23 revenues, but its guidance from the prior quarter was a 7.4% gain. Qualcomm, Infineon, and Analog Devices also grew their revenues.

Comparing 1Q 2023 revenue rankings versus 4Q 2022, Intel is again number one after Samsung’s revenues dropped 32% in 1Q23. Broadcom and Qualcomm remain numbers 3 and 4, respectively. SK Hynix dropped from number 5 in 4Q22 to number 10 in 1Q23 with a 34% revenue decline. Nvidia and AMD each moved up a spot to 5 and 6. Infineon Technologies became number 7, passing Texas Instruments (TI) and STMicroelectronics which remain 8 and 9. Micron Technology remains number 11. Analog Devices rose two spots to number 12, with MediaTek and NXP Semiconductors slipping from 12 and 13 to 13 and 14. Kioxia dropped out of the top 15 with a 26% percent decline. Renesas Electronics entered the rankings at number 15.

We at Semiconductor Intelligence define semiconductor suppliers using the WSTS methodology. Only final sellers of semiconductors are included. Thus, foundries such as TSMC are not included since they generally sell their output to other semiconductor companies which are the final seller. This avoids double counting revenues. Also, companies which use semiconductors only in their own products, such as Apple, are not included.

The guidance for 2Q 2023 revenues versus 1Q 2023 is mixed. Of the 11 companies providing guidance, five expect increases and six expect decreases. The largest expected gains are 2.5% from NXP and 2.4% from Intel. Qualcomm has the largest expected decline at 9.3%. Weak end demand and continuing inventory adjustments in the channel are cited by many companies as factors in the cautious outlook. Automotive and industrial remain the bright spots, with five companies citing these sectors as growing or at least flat versus the prior quarter. The uncertainty of 2Q 2023 is reflected by the range of revenue guidance. The weighted average guidance for 2Q23 is a 1% decline from 1Q23. However, the weighted average high-end guidance is a 3% increase while the weighted average low-end guidance is a 5% decline, an 8 percentage-point difference.

As reported in the Semiconductor Intelligence April newsletter, shipments of the key end equipment were down sharply in 1Q 2023. IDC estimated PC shipments were down 29% from a year ago. Recent IDC estimates of 1Q 2023 smartphone shipments show a 14.6% drop from a year ago. Continuing inventory adjustments throughout the channel indicate semiconductor shipments will lag end equipment shipments. Once inventories return to target levels, they are likely to remain lean as end equipment makers will be reluctant to build inventories with the uncertain economic outlook.

Forecasts for the 2023 semiconductor market released within the last month range from a 20% drop from Future Horizons to an 11.2% drop from Gartner. Our latest forecast from Semiconductor Intelligence calls for a 15% decline. Given the weakness in 1Q 2023 and the cautious outlook for 2Q 2023, a double-digit fall-off for year 2023 is almost certain.

The growth rate of the semiconductor market in 2024 depends on the timing of the market recovery in 2023. Gartner’s May projection was an 18.5% gain in 2024, assuming a 70% increase in the memory market. We at Semiconductor Intelligence are more cautious. Our baseline forecast for 2024 is 9% growth. Our 2024 forecast range is from 3% to 15%.

Semiconductor Intelligence is a consulting firm providing market analysis, market insights and company analysis for anyone involved in the semiconductor industry – manufacturers, designers, foundries, suppliers, users or investors. Please contact me if you would like further information.

Bill Jewell
Semiconductor Intelligence, LLC
billjewell@sc-iq.com