Intel’s second-quarter earnings showed its first net loss since 2017 amid a slowdown in demand for PC chips. “Some of our largest customers are reducing inventory levels at a rate not seen in the last decade,” CEO Pat Gelsinger said in Thursday’s earnings call.
After a long stretch of tight supply, there is a growing view among market watchers that the chip market has passed its peak in the current round of the boom-bust cycle that the industry goes through every three to four years.
The shift has hit smartphones and personal computers first as inflation dampens consumer spending around the world. Global smartphone shipments fell 9% on the year in the second quarter, according to Canalys, and IDC data shows a 15% drop in PC shipments.
Gartner in July cut its global semiconductor revenue growth forecast for the year from 13.6% to 7.4%. “Memory demand and pricing have softened, especially in consumer-related areas like PCs and smartphones, which will help lead the slowdown in growth,” it said.
Taiwan Semiconductor Manufacturing Co, as a producer of top-of-the-line logic chips, remains optimistic. Its third-quarter revenue guidance released in July represents a jump of more than 30% on the year.
CEO CC Wei said in an earnings call that TSMC expects “a few quarters of inventory adjustment, likely through first half 2023” but that “our customers’ demand continues to exceed our ability to supply”.
Semiconductor demand once depended heavily on consumer electronics like PCs and smartphones. While they still play a big role, chips for other applications, like autos and servers, have been rising fast. The market also has more variables to account for, like the ongoing logjam in global shipping.
An analysis of industry trends from six experts at chip trading houses, research firms and consultancies points to smartphones and PCs as areas that are already tipping into semiconductor oversupply, while supply and demand are balancing out for home appliances.
Production in these areas is starting to recover from chip-related constraints. Sony Group in May began accepting orders for some digital cameras again after a temporary halt late last year.
But the dearth of chips for autos, industrial equipment and data centres looks likely to drag on until late in the year. Toyota Motor has cut its August production estimate by roughly 20% from its initial figure.
“The supply-demand balance for parts is tight overall, and chips are the biggest bottleneck,” Fanuc president Kenji Yamaguchi has said. The industrial robot maker is responding with such moves as redesigning products to use different components.
“If we aggregate everything on a macro level, I think the demand is already satisfied,” Renesas Electronics president Hidetoshi Shibata said in an earnings call Thursday.
“On the other hand, products that require specific manufacturing capacities are in intensive demand,” he said, and “the situation of tightness is concentrated on a few areas and products”.
The varying conditions in the chip market are also reflected in data on semiconductor lead times from chip distributor Sourcengine.
Delivery times for microcontrollers, while still high, improved somewhat between February and June.
Power devices – for which demand has been rapidly increasing for applications like electric vehicles – have much longer lead times due to a shortage of capacity creating a structural supply-demand imbalance.