The Recovery has Started and it’s off to a Great Start!

August’s WSTS Blue Book showed Q2-2023 sales rebounding strongly, up 4.2 percent vs. Q1, heralding the end of the downturn and welcome news for the beleaguered chip industry.

The really good news, however, was that the downturn bottomed one quarter earlier than previously anticipated. This pull-forward only added a modest US$11 billion to Q2’s US$ 244 billion sales but this was enough to swing Q2’s growth from minus 5.0 percent to plus 4.2 percent.

A small change in the numbers at the start of the year makes a huge difference to the quarterly growth rates and hence the final year-on-year number.

Market Detail

The market turnaround was driven by a dramatic change in the Asia/Pac region, with 5.4 percent month-on-month growth, followed by the US (plus 3.5 percent), Japan (plus 2.1 percent) and Europe (plus 1.8 percent).

On an annualised basis, Q2-2023 was down 17.3 percent vs. Q2-2023, with Asia/Pac down 22.6 percent, the US down 17.9 percent, Japan down 3.5 percent with Europe, the only region showing year-on-year growth, at plus 7.6 percent.

The near-term market outlook is starting to look a lot stronger, driven by the positive impact of the inventory burn, stronger than expected resilience in the global economy, especially in the USA, and a seemingly robust demand boost from the emerging AI market.

Forecast Summary

Looking ahead to the second half of the year, the overall industry consensus has now (mostly) acknowledged a likely double-digit decline for 2023 vs. the ‘positive growth’ positions predicted this time last Year.

Future Horizons stood alone in the crowd when we first published our 2023 double-digit decline forecast 15 months ago in May 2022, likewise too when we stood by that number at our January 2023 Industry Update Webinar when all others, bar one, were predicted a very mild downturn followed by a sharp V-shaped rebound in 2024.

The stronger than expected second-quarter results will now push our 2023 forecast beyond the bull end of our January 2023 forecast scenario, but our longer-term concerns, re the still ongoing uncertain economic outlook and the excess CapEx spending, show no signs yet of abatement.

Over-capacity is the industry’s number one enemy, depressing ASPs and condemning the industry to low dollar value growth. An economic slowdown will nip any recovery in the bud.

Market Outlook

With two of the four industry fundamentals, unit sales and ASPs, now slowly but surely rebalancing, the havoc and inevitable consequences of the preceding supply-side shortage-induced market boom are now starting to recede. The stage is now set for a return to industry growth, but from a much-reduced base.

The size and shape of the recovery will depend on the potentially derailing impact of capacity (over-investment) and demand (the economy), the former of which is not looking healthy, and the latter still steeped in mixed signals and uncertainty.

That said, 2023 will undoubtedly transpire to have been a line in the sand; and 2024 will equally clearly be better. The recovery has got off to a great start, but its pace and form have yet to be determined.

We will be covering all this, together with an update to our outlook for 2023-24, at our forthcoming Industry Update Webinar on Tuesday 12 September at 3pm UK BST (GMT+1). Register now at:

https://us02web.zoom.us/webinar/register/7416911384194/WN_akISM9QxS8uNZS_oihzqFQ

Also Read:

The Billion Dollar Question – Single or Double Digit Semiconductor Decline

The Semiconductor Market Downturn Has Started

Semiconductor Crash Update

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