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The pandemic certainly turned the semiconductor industry on its head.
Despite record production of semiconductors, there were shortages everywhere. That led to months-long waiting lists for many consumer products. So, to meet consumer demand, semiconductor makers ramped up supply.
But then inflation arrived and decided to stay awhile. Central banks responded by raising rates, and economies slowed. The appetite for items like consumer electronics waned, leaving inventories stuffed full of chips.
The entire semiconductor supply chain is still feeling the ramifications.
But there’s a bright light on the horizon every investor should know about…
Chip Demand Slowdown
In fact, seven out of the nine top chipmaking equipment manufacturers globally are likely to log a sales decline in the current quarter as their clients rein in capacity investment in the face of a worsening semiconductor market.
This is a clear sign of global market deterioration from the previous quarter, when six of the top nine players reported revenue growth.
Slowing investment by semiconductor manufacturers is the main reason behind the lackluster current outlook. Memory chipmakers, in particular, have been hit hard by the slump in demand for smartphones and servers, as well as plummeting prices.
All nine of the top chip equipment companies project an uptick in demand in the latter half of this year, compared with the first half. But given the risk that capital investments by Taiwan Semiconductor Manufacturing (TSM) and Samsung Electronics will come in below initial plans, the timing of a market recovery is hard to pinpoint.
During a recent earnings call, Applied Materials (AMAT) CEO Gary Dickerson said…
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