The Impending Downturn of the Semiconductors

Touted as the enabling technology for the digital era, the semiconductor industry has had its uptime. Today, the modern economy relies on semiconductors, and it is required to run every component of society smoothly. The intensity of the world’s reliance on the industry was clarified during the pandemic, and this intensity is predicted to get stronger with time.

Malcolm Penn, Founder, and CEO of Future Horizons, has analyzed the direction in which the semiconductor industry is moving and predicts a negative 22% growth in 2023. Since 1961, there have been 15 upturns for semiconductors after the first cyclical downturn. There have been around ten strong booms, and a shortage would have certainly hit if not for the market collapse in 2018. It needs to be emphasized that the industry has not had a shortage since the boom in 2000.

Both the 2021 boom and the 2022 shortage were predictable, not enough to create any buzz and the semiconductor industry remains fundamentally cyclical. However, the key factors such as areas of the economy, unit demand, capital expenditure, and average selling prices are starting to look like a red flag indicating the 17th market downturn. With the ASPs plunging in June, which was earlier than predicted, the jury is still out on how fast the downturn is approaching.

Even then, the global semiconductor market is projected to grow by 4.6% to US$ 662 billion in 2023. Despite having no shortage of growth drivers in the semiconductor industry, the current economic condition and the nature of the industry guarantees that there will be no soft landing.