Massive layoffs in Big Tech have topped 230,000 US engineers and tech workers in recent weeks. By comparison, the situation for the chip sector is more sanguine, according to analysts who spoke to Fierce Electronics.
Tech layoffs are not hitting the semiconductor sector nearly as much as companies like Microsoft, Google and others generally grouped under the heading of Big Tech.
“There are not a great number of layoffs [in semiconductor companies] across the board and it’s much more about hiring freezes…and then for anything not considered a strategic project,” said Ron Hofmeister, EY partner and global strategy and operations semiconductor leader.
Like many global semiconductor prognosticators, Hofmeister foresees a total semiconductor revenue downturn in 2023 ranging 3% to 5%. That downturn follows a record year in 2022 that reached $583 billion. He and a wide number of industry insiders believe the cyclical chip sector will escalate to $1 trillion in sales by 2030, thanks to massive growth in chips used in nearly everything electrical, from cars to satellites and more traditional categories like laptops and smartphones.
Today, the semiconductor market is heavily geared towards making chips for PCs, mobile devices and data centers, accounting for 60% of the total, he said. That leaves the remaining 40% split evenly between what he considers to be four major groups: automotive, internet of things, smart city applications and military.
Hofmeister sees chip growth in that latter group but a slowing in PCs, mobile devices and data center chips. Such slowdowns have been noted by large chipmakers such as Qualcomm, Intel and AMD with much of the blame placed on excess inventory already held by their customers after three years of pandemic buy-ups.
“If a chip company is focused on automotive, [2023] could be a really good year as carmakers continue to expand in their use of chips used for everything in a car,” he said in an interview. “Many semiconductor firms are hiring in those areas where they see strategic growth and freezing hiring in non-strategic areas.”
“We still believe by 2030, it will be a trillion dollar market, as auto, IoT, and smart cities grow significantly,” he said.
His optimism for the chip sector is not necessarily shared by CEOs across a broad range of industries, however. EY reported in January that virtually all US CEOs in a survey expect a recession in 2023, though milder in the US. Those responses came from 1,200 executives surveyed in November across 10 countries and six industries.
Karl Cheng, EY-Parthenon Americas technology and telecommunications sector leader, told FE the Big Tech layoffs have attracted all the headlines, which would seem to imply a broader retraction, but there is still growth in technology across the economy. Technology in general for automotive “continues to be pretty robust,” he said.
In other words, an engineer may not get a job at a major social network now, but can possibly get a job at a cereal manufacturer because technology is infused in all sectors.
In the retail sector, for example, CEOs are expected to spend less on advertising with fewer ad sales on social media, while those same consumer brands are still building out a digital presence and need help with technology-driving skills, Cheng said.
The US Bureau of Labor Statistics reported on Feb. 1 about 11 million US job openings across all sectors of the economy as of Dec. 30. That number included 1,746 for trade, transportation and utilities, 1,956 for business and professional services and 2,119 for education and health services. All of those categories may employ engineers and programmers in STEM fields, although the latest data does not describe openings by job title or tech sector as a separate group.
The overall economy chugs along on a fairly predictable cycle “that we have been through before and something people should recognize,” Cheng said. “Compared to 2008 and 2001, this one feels OK and manageable.”
One way top executives are expected to manage a difficult 2023 will be through mergers and acquisitions, although that pipeline is only half of what it was a year earlier. “CEO’s still see strategic M&A as a critical lever for future growth and dealmaking is very selective. It will still happen, but people will be a lot more cautious,” he said. Many are left wondering when private equity will come back into the market.
On the semiconductor front specifically, analysts are curious to see how the infusion of $52 billion in US government dollars from the CHIPS Act will be divvied out and impact growth. The impact “hasn’t been fully defined yet, as the government has not given out any money yet,” Hofmeister said. “There’s a need to get a lot of chip manufacturing out of East Asia and into the US and Europe because right now there’s just way too much risk with so much manufacturing in Taiwan.”
The CHIPS Act has activated more than a dozen chip and wafer manufacturing proposals in the US, while the push for more chip yields is a global phenomenon with 120 different manufacturing initiatives currently underway valued at $500 billion in various countries including the US. “It’s global,” Hofmeister said. “You’ve never seen anything close to this [growth] in history.”
Countries in Europe and Japan all have similar initiatives as the US, while Saudi Arabia and India are looking to create their own ecosystem and ways to get materials and manufacturing. Mexico wants fabs and wafer production and assembly capability. “It’s not just manufacturing, but they want to create the whole ecosystem,” he said.
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