Review and prospect of the semiconductor industry in 2022
Current status of the global semiconductor industry
The prosperity of the global semiconductor industry in 2021 is unusual. It is a year of high growth rarely seen in the past 20 years. It is characterized by shortages, price increases, and extended delivery cycles. The raging epidemic in the last few years and the continued suppression of China’s semiconductor industry by the United States have put the original normal global semiconductor industry chain in jeopardy.
According to data provided by the World Semiconductor Trade Statistics Association (WSTS), the global semiconductor industry will grow by 26.2% in 2021, reaching a total size of US$558.9 billion. According to the latest forecast released by WSTS, dragged down by the sharp freezing of the memory chip market, the global semiconductor market will shrink by 4.1% to US$557 billion in 2023. This is the first time the industry has declined since 2019.
From the perspective of various semiconductor products, their market performance varies. According to data from IC Insights, a semiconductor industry research company, the four major products in 2022, such as logic chips, analog chips, discrete devices and sensors, are expected to achieve steady growth of more than double digits; and products such as microprocessors and optoelectronics are also there will be a single-digit increase.
Only the highly cyclical memory market declined, with a sharp decline of 17%. This means that the decline in the memory market is an important reason for dragging down the overall growth of the IC and semiconductor markets this year.
From the perspective of global semiconductor investment, driven by investment inertia, semiconductor investment in 2022 will still be at a high level, for example, it will reach US$153 billion in 2021, an increase of 35%; while the investment in 2022 will reach US$185.5 billion, an increase of 21% year-on-year.
However, the sales growth rate of the semiconductor market will not match the investment growth rate. According to the forecast of the International Semiconductor Industry Association, the sales of semiconductor equipment will increase from 90 billion US dollars in 2021 to 99 billion US dollars in 2022, an increase of 10%. The sales growth of leading enterprises is higher.
According to Applied Materials’ fiscal year 2022 (ending October 30) results, its total sales revenue increased by 12% year-on-year to US$25.78 billion, and the company’s installed capacity increased by 8% year-on-year in fiscal year 2022.
In the field of automotive chips, there will still be a structural shortage in the context of an overall market surplus. According to a report written by Kristin Dziczek, a policy adviser to the Federal Reserve Bank of Chicago, on the issue of automotive chip production capacity, the shortage of automotive chips is still ongoing and is estimated to continue until 2024.
Although market performance varies, 2022 is destined to be a year of adjustment for the semiconductor industry. The capital market has already responded to this in advance. According to the latest data, the total market value of American chip giants such as Nvidia, AMD, Intel and Micron has evaporated by $1.5 trillion.
Layoffs in the industry have also begun. According to VTDigger reports, the famous American foundry GF announced at a staff meeting on December 1 that the company will lay off as many as 800 employees worldwide in December this year. Intel’s Irish unit will put up to 2,000 employees on unpaid leave for three months in a bid to cut costs. This is actually a transitional stage of layoffs in disguise.
TSMC, which dominates the world’s leading semiconductor foundry, is no longer the same. First of all, the customer cuts the order. For example, AMD, MediaTek, Qualcomm, Apple and many other customers cut orders and transferred the original 3nm orders to 5nm and 4nm process technology. Intel’s large orders have also shrunk significantly, and new orders are nowhere in sight. Under the reduced demand, the capacity utilization rate of TSMC’s 7nm and 6nm process technology continued to decline. The second is inventory adjustment.
Industry insiders believe that AP and SoC inventory adjustments for 5G smartphones may continue until next year, which is the main reason for the decline in TSMC’s 7nm and 6nm capacity utilization.
Secondly, terminal markets such as smartphones and PCs are weak. From the fourth quarter of this year, TSMC’s 7nm/6nm capacity utilization rate will no longer be at the high point of the past three years. This situation is expected to continue until the first half of 2023 and the second half of next year. Under many changes, TSMC began to reduce its investment plan. Its original plan was to invest about US$44 billion in 2022, which was revised downward to US$35 billion.
How to view China’s semiconductor industry
The development of China’s semiconductor industry is unique, and its complexity far exceeds expectations. China’s semiconductor industry is continuing to grow under the vigorous promotion of national funds and the Science and Technology Innovation Board.
However, the United States exerted heavy pressure again on October 7 this year, bringing great uncertainty to the development of China’s semiconductor industry. It must be admitted that some root problems in the development of China’s semiconductor industry cannot be avoided at all. For example, it is very difficult to solve the constraints of EDA tools, IP and semiconductor equipment and materials. It is almost impossible for China to try to overcome these barriers one by one in a short period of time.
However, due to the unsustainable model of relying heavily on imported equipment and materials, the development of China’s semiconductor industry has no way out. The only way to improve self-confidence is to overcome or slow down the various suppression measures of the United States through several overcoming difficulties. The development of China’s semiconductor industry must break the past stereotypes, promote the process of localization and substitution in key industrial links, and strive to get rid of the passive situation of the United States in key industrial links to a certain extent.
The purpose of the U.S. crackdown is to expand the technology gap with China’s semiconductor industry and lock China’s semiconductor industry at a lower security level. Specifically, it forced China’s advanced logic process and two memory production lines that have invested heavily in mass production to stop. To this end, China must confront each other, rely on the advantages of the new nationwide system, and do everything possible to maintain the continuous operation of several key production lines.
For the development of the semiconductor industry, the most valuable resource is talents. Industry insiders estimate that the US crackdown will cause about 1,000 employees to be spared in foreign equipment factories, 20% of whom are senior engineers who have worked for many years. At present, China’s semiconductor industry urgently needs to maintain the operation of four backbone chip production lines and realize the localization of semiconductor equipment, among which talents are a key resource.
The global semiconductor industry is facing multiple impacts from changes in the industry cycle and geopolitical factors. 2022 is a year of adjustment for the global semiconductor industry, and it is also a year of pressure for China’s semiconductor industry to face the precise attack of the United States.
China’s semiconductor industry has grown rapidly over the past few decades and has become an integral part of the Chinese economy. The strong support from the government and the active development of enterprises have made Chinese semiconductor enterprises more and more competitive in the global market.
However, with the intensification of market competition, China’s semiconductor industry is facing some challenges. Overdependence of the industry and growing competitors from other countries are two of the main problems.
Nevertheless, China’s semiconductor industry will continue to grow and develop. The government will continue to vigorously support the industry, help companies cope with market challenges, and promote the healthy development of the industry.
In the context of industrial adjustment, China needs to give full play to the advantages of the new nationwide system, use all available resources, strive to attract talents in the semiconductor industry, gradually promote the localization of key industrial links, and form sustainable development capabilities for China’s semiconductor industry, to accumulate strength and resources.