Global semiconductor sales rose by double digits in May, but analysts do not believe the boom in chip sales will continue.
The Semiconductor Industry Association trade group reported on Tuesday that global chip sales in May rose 18% to $51.8 billion from a year ago, with sales “increasing sharply” in most markets. regions and product categories. Month over month, SIA said sales were up 1.8% from April.
Analysts noted that these May sales were well above month-over-month seasonal measures, but said they were not indicative of what to expect in the sector in the coming months. For one thing, May’s sales increase alone can be misleading given that it’s expressed in dollar revenue, not units sold.
While sales were up 18% from a year ago, Bernstein analyst Stacy Rasgon pointed out that the increase was due to higher prices and the number of units sold had in declined fact – “We note that the industry as a whole [average selling prices] increased 21% year-on-year; total units dropped -1%,” he wrote.
Positive results and negative feedback continue a trend in the semiconductor industry that has continued all year – sales continue to hit record highs as pandemic-related semiconductor shortage occurs, but analysts continue to warn of falling demand and the cliff it could cause. Investors feel like they’ve seen this movie before, when chipmakers announced record sales in 2018 only to see those sales plummet because customers bought two or three chips before prices could rise. As a result, chip companies found themselves with inventory that took several months to clear after the crisis subsided.
This fear of oversupply weighed heavily on chip stocks in 2022, with the PHLX Semiconductor Index SOX,
down 37%, against a 20% drop in the S&P 500 SPX index,
and a 28% drop in the tech-heavy Nasdaq COMP composite index,
Micron Technology Inc. MU,
last week added momentum to the belief that the COVID-inspired chip boom is coming to an end, even as executives admitted in earnings that they don’t really know when that will happen. Ahead of a flurry of chip revenue later this month and August – including Advanced Micro Devices Inc. AMD,
and Nvidia Corp. NVDA,
two of the hottest stocks in recent years – analysts expect more ominous forecasts.
Opinion: The chip boom is probably over, as Micron says it’s in a “recession”
Even with relatively strong first-half results, UBS analyst Timothy Arcuri expects demand to decline in the second half of 2022 unless smartphone demand in China picks up. The analyst said his forecast for the sector was unchanged from the end of June, with slower-than-expected annual growth of 14.8%.
“Vendors and OEMs have seen increasing weakness since mid-May for consumer applications (smartphones, TVs, PCs),” Arcuri said. “While we continue to expect the domestic replacement cycle in China to re-accelerate at some point in 2H22, vendors are not yet seeing an inflection in smartphone OEM volume in China.”
Evercore analyst CJ Muse said he stood by his forecast for 17% growth to $650 billion, up from 2021, when annual semiconductor sales topped for the first time half a trillion dollars to a record $555.9 billion. While Muse expects a significant slowdown in semiconductor sales, it predicts a “soft landing” for the industry in 2023.
“Our forecast reflects an imbalance between supply and demand that persists until CY23, as well as a structurally stronger underlying demand and [average selling price] tailwinds,” Muse said.
SIA also used the monthly sales report to issue an open statement to Congress dragging its feet on funds to encourage critical silicon wafer manufacturing on US soil.
“Continued strong demand for semiconductors will necessitate more research, design and manufacturing of chips in the years to come,” SIA chief executive John Neuffer said in a statement. “We urge leaders in Washington to quickly enact bipartisan innovation and competitiveness legislation that ensures much of this chip production and innovation happens on American soil. The clock is ticking.
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Last week, Senate Republican leader Mitch McConnell threatened to derail a $52 billion bill in funds to expand US semiconductor manufacturing if Democrats revive their policy agenda. climate and social stalled. The uncertainty over the bill, which many chipmakers had been relying on, was enough for Intel Corp. INTC,
to postpone its groundbreaking ceremony for a $20 billion fab in Ohio last month.