Fun With Data – Semi Stuff
Semi.org is a large trade organization whose mission is to “…advance the growth and prosperity of our member companies’ ecosystems…”, sponsoring a wide variety of committees, expositions, market research, and influencing public policy. As part of their research, they forecast a number of semiconductor categories, some of which we have highlighted in notes earlier this year (5/4/22, 11/07/22). This week Semi introduced its forecasts for semiconductor equipment spending, which indicated a strong year in 2022, ($108.5b) up 5.9% y/y[1], but a decline of 15.9% in 2023 ($91.2b), albeit with a positive 2024, up 17.5% from the 2023 forecast, although even with the substantial spending gain in 2024, the absolute spend ($107.16) in 2024 is expected to be lower than this year’s record number.
That said, we note also that the previous forecasts for 2022 and 2023, which were made in September of this year were $117.5b and $120.8b, which puts the new estimates down considerably from the previous forecasts, which were up 14.5% y/y for 2022 and up 2.8% y/y for 2023. Things certainly have changed over the last few months for the semiconductor business, which has gone from shortages across numerous, if not most categories, to shortening lead times and lower utilization in many, so we do not fault SEMI.org for the revisions, more the industry itself for assuming that the rules of the business had changed and capacity expansion will solve all supply chain issues. With a number of regional incentive packages being offered to chip producers, construction was started on 23 new fabs last year, 33 this year, with 28 expected next year, and while China will lead the way with 20, the America’s represent 18 and Europe 17, with Taiwan in 4th place at 14.
While each fab has its focus, it is easy to see how Semi derives the upswing in equipment spending in 2024, but little has been said about how closely these fabs will map with demand, a far more relevant question, and if we use the display industry as a guide, an accurate match-up would likely not be the case. It is hard to separate potential business prospects for each semiconductor producer from the overall effect each capacity addition has on the industry, but again, using the display space as an example, semiconductor producers are less interested in the overall industry than they are in what they report to shareholders, so if we had to speculate on a broad basis, we would expect one of two scenarios in 2024/2025, one being a over-capacity in many semiconductor segments, and the other, more rational one, being less spending than forecast in 2024, as some of that capacity is pushed out.
Perhaps the semiconductor industry is a bit more rational than we are used to, and maybe we are a bit more negative after hearing nothing but massive optimism toward semiconductor growth as a solution to the shortages the semiconductor industry faced earlier this year. However, human nature being what it is, and business being what it is, such unbridled capacity growth carries substantial risk to the semiconductor apace and therefore consumer electronics in general. In the long-term, such near-term growth will likely find the demand it needs, but we expect it will be a bit of a bumpy ride
[1] Given the previous three quarters worth of data, the 2022 forecast assumes semiconductor equipment spending of $28.64b, down 0.4% q/q but up 4.6% y/y
That said, we note also that the previous forecasts for 2022 and 2023, which were made in September of this year were $117.5b and $120.8b, which puts the new estimates down considerably from the previous forecasts, which were up 14.5% y/y for 2022 and up 2.8% y/y for 2023. Things certainly have changed over the last few months for the semiconductor business, which has gone from shortages across numerous, if not most categories, to shortening lead times and lower utilization in many, so we do not fault SEMI.org for the revisions, more the industry itself for assuming that the rules of the business had changed and capacity expansion will solve all supply chain issues. With a number of regional incentive packages being offered to chip producers, construction was started on 23 new fabs last year, 33 this year, with 28 expected next year, and while China will lead the way with 20, the America’s represent 18 and Europe 17, with Taiwan in 4th place at 14.
While each fab has its focus, it is easy to see how Semi derives the upswing in equipment spending in 2024, but little has been said about how closely these fabs will map with demand, a far more relevant question, and if we use the display industry as a guide, an accurate match-up would likely not be the case. It is hard to separate potential business prospects for each semiconductor producer from the overall effect each capacity addition has on the industry, but again, using the display space as an example, semiconductor producers are less interested in the overall industry than they are in what they report to shareholders, so if we had to speculate on a broad basis, we would expect one of two scenarios in 2024/2025, one being a over-capacity in many semiconductor segments, and the other, more rational one, being less spending than forecast in 2024, as some of that capacity is pushed out.
Perhaps the semiconductor industry is a bit more rational than we are used to, and maybe we are a bit more negative after hearing nothing but massive optimism toward semiconductor growth as a solution to the shortages the semiconductor industry faced earlier this year. However, human nature being what it is, and business being what it is, such unbridled capacity growth carries substantial risk to the semiconductor apace and therefore consumer electronics in general. In the long-term, such near-term growth will likely find the demand it needs, but we expect it will be a bit of a bumpy ride
[1] Given the previous three quarters worth of data, the 2022 forecast assumes semiconductor equipment spending of $28.64b, down 0.4% q/q but up 4.6% y/y
Semiconductor Manufacturing Equipment Sales by Region - 2018 - 2022 - Source: SCMR LLC SMI.org
emiconductor Manufacturing Equipment Sales - 2017 - 2023 (f) - Source: SCMR LLC, SEMI.org
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