Chips and Dip
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Posted on 02/04/2023 5:35:59 AM PST by FarCenter
The semiconductor gold rush is all but over, and we've had our fill. Or so the past month of dismal earnings might have you believe.
Electronics giant Samsung saw its profits contract 69 percent during the fourth quarter, while revenues slumped 8 percent overall. South Korean memory manufacturer SK Hynix, meanwhile, followed a few days later with an equally bleak report. Both companies told a story of macroeconomic forces that were suppressing consumer spending and driving DRAM and NAND flash inventories to unprecedented levels.
Put simply, where there was once a chip shortage there is now a glut. Well, of memory anyway — more on that later.
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The worst has yet to come Memory fabs' options, given the current predicament, are limited. These companies have fairly long and complex supply chains and largely compete on pricing and process tech, CCS Insights analyst Wayne Lam previously told The Register.
Until things improve, Samsung and SK Hynix are focusing on products like LPDDR5, DDR5, and HBM used in mobile, next-gen server, and high-performance computing products, which it anticipates will drive future demand.
By comparison, conventional fabs, like those operated by TSMC, and those not dedicated to memory at Samsung, have relatively short, straightforward supply chains. This, Lam explained, gives them greater flexibility to reallocate capacity to chips that are in higher demand.
Despite all of this, the next few quarters are looking pretty grim. Over the past few weeks, chipmakers and foundry operators have offered a near universally grisly outlook on the quarters to come.
Intel expects its revenues to fall to $11 billion and potentially lower in the first quarter of 2023. Meanwhile, AMD is predicting flat revenues for Q1 and poor PC and gaming sales throughout the 2023 fiscal year. And, this week, Qualcomm again blamed the fact nobody is buying phones for its shoddy performance. Even TSMC forecast a revenue drop, its first in four years.
The general consensus among these companies seems to be that things should start picking up again in the second half of 2023. But not everyone is so sure. In a recent report, Dylan Patel at SemiAnalysis predicted that inventory levels wouldn't return to normal in Q2, and that the bare market for semiconductor companies would stretch on longer than anyone anticipated.
"We believe there is around a 15 percent downside for semiconductor companies' valuations or significant sideways movement before the real bull run can start," he wrote. "Days of inventory are currently at all-time highs. Even higher than the dot-com bubble and the 2008 financial crisis. This inventory will take a lot longer than two quarters to digest."
Patel isn't the only one. In a recent TrendForce report, analysts predicted foundry revenues would contract 4 percent in 2023, as wafer demand continues to dry up and inventory consumption slows.
When the semiconductor market does recover, the next question will be how quickly. Short of another civilization-altering event, it seems we're unlikely to see the kind of pandemic-level investment in IT that fueled so much of the semiconductor demand over the past three years.
Why all the fabs then?
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I wonder if video card prices will drop and availability will increase.
Very interesting. Thanks for posting!
No need for electronics from now on. Oh yeah.
“Why all the fabs then?”
Xi wants to snatch Taiwan for his legacy.
I thought this is the greatest economy ever?…
To be honest, I still don’t understand how stocks are so high…real estate as well.
I think a massive economic downturn is coming, but I have zero track record…
TSMC is building in Arizona right now. It takes a long time though…
I'm calling a strong BS on this one. It is almost impossible to find microcontroller ICs at any of the usual places. Some are estimated to arrive in small numbers in December 2024.
This analyst is about 4 months too late. Let him show me his buy/hold/sell ratings when Nvidia was over 500.
The selloffs happened already. If he thinks there’s another 15% downside, he’s going to be waiting a long time.
Equity prices usually look out 3-6 months, that’s why they are rallying. But the rotation to value finally has fully occurred. Stocks at 8x earnings and a 5% dividend (which were in abundance 3 months ago) were going to rally while the mega cap companies were correcting towards reality.
I work for Microchip - what down turn? We sure aren’t seeing it.
Thank you for the explanation.
Does this mean cheap car prices are just around the corner?
I mean, we saw several news stories about acre upon acre of otherwise finished cars just waiting for chips when there was a new car shortage and prices were high.
So now we got chips. So all those new cars should hit the market at once.
They’ll be giving F150s away... (LOL).
How are the control idiots going to use the shut off switch on our new vehicles?
Arizona or Oregon?
Intel building 50 miles from here (New Albany, Ohio). Silfex (Lam Research) was supposed to Benefit from the build but now they’re laying off (1,300 globally unknown amt at 2 local facilities). ??
No. The glut involves current generation chips. Auto makers use an older generation of chips that is still in short supply because no one wants to expand factory capacity for what are essentially obsolete chips. Current generation chips will take a while to be tested to see if they can handle the rigors that car chips go through.
i’ve heard there are US based semiconductor plants being built.
i’m sure this had an impact
“I wonder if video card prices will drop and availability will increase?”
For the models that were new in 2020 and unavialbe until mid 2022 now is the time to pick one up. The 2023 generation has sufficient performance uplift and availability the RTX3080 and XT6800 are the value standard. The drivers are optimized for 3 year old cards as far as they ever will be.
I expect a RTX3080 will become the reach upwards for performance the budget builder in 2Q2023. A 400 dollar computer less video card with a 300 dollar upgraded graphics card is all that the mortals need. RAM, Storage and Lower Half CPUs are at cheap end of the cycle. Motherboards seem to holding onto covid pricing. Everything else, just shop around and dont be afraid of lightly used for 50% discounts.
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