The global semiconductor market closed 2022 with record revenues of $595.7 billion (€564.083 billion), slightly surpassing the all-time high recorded in 2021 of $592.8 billion (€561.337 billion), according to a report published by consulting firm Omdia. However, the sector does not have much to celebrate, as demand declined in the last quarter of last year, leading to a 9% drop in the sector’s turnover. Moreover, the start of 2023 has not been much better.
Omdia’s report notes that an accumulation of factors has led to a drop in semiconductor sales and also depressed chip prices. Manufacturers have been trying to reduce inventories built up in previous quarters due to high demand at the time.
According to the report, the downward trend in industry revenue has accumulated in several quarters compared to previous quarters. In the last three months of 2022, semiconductor market revenue declined by 9% compared to the July-September period. Moreover, the $132.4 billion (€125.527 billion) turnover of semiconductor manufacturers in the fourth quarter of 2022 represents only 82% of the record quarterly revenue of $161.1 billion (€152.409 billion) achieved in the last three months of 2021.
Omdia analyst Lino Jeng stresses that the sharp decline in semiconductor sales, especially in the memory segment, is mainly due to three factors. First, the rapid decline in Information Technology (IT) demand after the boom experienced during the Covid-19 crisis. Secondly, excess inventory held by memory manufacturers due to the build-up during the period when demand for these products was at historic levels. And thirdly, the macroeconomic environment, such as the contraction being experienced in many of the world’s major economies and the slowdown in demand for IT products due to the rise in interest rates by central banks.
Semiconductor prices have also fallen “significantly” in Q4 2022 due to supplier initiatives to accelerate sales and reduce excess inventory. Omdia expects this trend to continue into the first quarter of 2023.
