The Market Meltdown Is Now In Full Flow – Q3 Down 6.3% versus Q2 2022arshia.pasdar
According to Future Horizon Global Semiconductor Report for November 2022, the global economic outlook has deteriorated further over the past month, resulting from a mix of slowing end-market demand. On-going supply chain disruptions, Covid-19 enforced lockdowns in China, increasing levels of inflation, interest rate rises, and the increased tightening of US-driven chip restrictions on China.
September’s data should now kill any lingering hopes that the downturn will be just a minor memory-led industry correction lasting one or two quarters at most. The extent of the Q3 decline is a clear signal. The market downtown is in full flow, and the next three quarters will be nasty. The analysis indicates an overall 22% decline for 2023 (published on May 22). There are always some products and applications at the detail level that will be less affected than others. But the downturn follows the well-trodden path of the past 16 industry downturns.
Following the typical cycle, the memory market shows the first signs of stabilization. At the same time, the later hit logic and micro markets are still in decline. Analog, the “Last Man Standing” category, has also started the fall indicating that the downturn will be more widespread and far-reaching than many industry players believe. The fact that CapEx is still increasing when the semiconductor market is slowing does not bode well for the chip industry or the equipment industry. Given the long lead times involved, a hangover effect is inevitable. There is at least a two-quarter delay before the CapEx spending stops.
The only end market sector that seems booming with shortages still in place is automotive—driven by electrification and increased levels of siliconization. According to VW, it will persist throughout 2023.
But when household discretionary is squeezed once the macroeconomic issues start to bite home. Primarily interest rate rises and labor hire freezes, quickly followed by layoffs and rising unemployment. What’s the first big ticket item to drop or push out when your choices are “do I heat my home and pay my mortgage or buy a new car?” The car market will crash by mid-2023, most likely.
If the world enters a recession, end demand across all sectors will fall, and likely automotive is the first category to suffer.