Demand will be down by as much as 28% through September for wafers, devices and other materials used in the global semiconductor supply chain, according to a new forecast by Linx Consulting and Hilltop Economics.
“The demand picture for the semiconductor supply chain is thus gloomy,“ wrote authors Mark Thirsk, managing partner at Linx, and Duncan Meldrum, president of Hilltop, in a blog posted on SEMI Monday.
“We are advising clients supplying materials into the wafer fabs and packaging supply chains to develop contingency plans for a sharp decline in product demand of as much as 28%, which may bounce back rapidly to 2019 levels or higher in early 2021,” Thirsk and Hilltop said.
“However, companies should also be vigilant of a slower than hoped for return to previous activity levels if the effects of the pandemic continue for an expected period,” they added.
Thirsk and Meldrum described three models forecasting shipments of wafers through mid-2022. They predicted a best-case scenario in Q2 and Q3 of this year with an 11% decline to that worst case decline of 28%. The best case scenario depicts a V-shaped global recession with businesses and consumers aggressively spending on technology goods that softens the impact on semiconductors in 2020.
The worst case is a V-shaped global recession with severe COVID-19 impact that is followed by a sharp economic rebound. In a third, intermediate scenario, the decline would be about mid-way between minus 11% and minus 28% in Q2 and Q3 with the pandemic impact developing into a U- or L-shaped global recession with an economic rebound delayed for several years.
Each of the three scenarios was given a probability rating, with the 28% decline scenario rated with the highest probability at 40%.
There were about 2.8 million million square inches (MSI) of wafersshipped in 2Q 2019 with a high point of about 3.2 billion MSI shipped in 1Q 2018. Two of the forecast scenarios show a return to about 3.2 billion MSI in late 2020, but then both forecasts jump to about 3.6 billion or more in 2022. The V-shaped scenario with the worst impact shows a decline to less than 2 billion MSI in mid-2020 before shooting back up.
The authors noted that the economic prognosis for all the major economies has “worsened dramatically” although they admitted “forecasts remain speculative.” They noted that GDP declines for the G7 nations vary from minus 5.9 % for Japan to minus 10.2% for Italy.
Despite their pessimism, the authors also noted a much more positive report by semiconductor industry association SEMI recently showing an increase of nearly 3% in demand or silicon in Q1 2020, compared to Q4 2019. Also, revenues were up 6% in the quarter compared to the prior year, with three large foundries in Taiwan and China showing 32% growth.
Yet, the authors also noted that SEMI’s findings are contradicted by a 4% drop in revenues for major public silicon wafer suppliers in Q1 over Q4 2019. They said this could have been because of average sales price declines or “inventory effects,” but they did not elaborate.
Last week, SEMI reported semiconductor manufacturing equipment billings were up 13% in the Q1.
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