Chip shortage risks becoming a glut in 2023 as fabs scramble to add capacity, say analysts

US-China trade war

As semiconductor foundries scramble to add capacity to meet soaring demand amid a protracted chip shortage, some experts are warning that the demand-supply equilibrium will be reached in 2023, possibly leading to a supply glut down the road.

“Our view is that when we come to 2023, there will be sufficient supply to come back into some degree of balance, or maybe even overcapacity,” Gokul Hariharan, co-head of Asia-Pacific TMT Research at US investment bank J.P. Morgan, said in an interview with the Post, adding that it was too early to predict when the glut would occur.

Hariharan said he does not expect a major downturn in 2023 because “demand is still relatively healthy,” but a 2 per cent revenue decline for the industry is possible.

There is potential for overcapacity in 2023 as “larger-scale capacity expansions begin to come online towards the end of 2022,” according to a report from IDC Research.

These include a new megafab being built in the US state of Arizona by Taiwan Semiconductor Manufacturing Co (TSMC), and a US$17 billion fab in Texas announced by Samsung Electronics, with production slated to begin in the second half of 2024.

The semiconductor industry is highly cyclical, running through a peak-to-trough cycle every 4 to 6 years. Upturns occur during periods of high demand, which in turn cause supply shortages, leading to higher prices and revenue growth.

However, that is often followed by downturns and inventory build-up, which result in falling prices and negative or zero revenue growth.

For example, the revenue of the top 10 semiconductor firms, including Intel and Samsung Electronics, declined 12 per cent in 2019 due to oversupply in the DRAM market and the US-China trade war, according to Gartner.

China is also in the expansion game, with its leading foundry Semiconductor Manufacturing International Corp (SMIC) building three 28nm fabs in Beijing, Shenzhen and Shanghai, respectively. The combined capacity of 240,000 12-inch wafers per month will nearly double its current output once volume production is reached in the next three to five years.

US-China trade war

A Chinese flag near a logo atop the Semiconductor Manufacturing International Corp. (SMIC) headquarters in Shanghai, China, on Tuesday, March 23, 2021. Photo: Bloomberg

Analysts said tightness in the semiconductor supply chain has already begun to ease in China as momentum in sales of smartphones and new energy vehicles, two key end users of chips, has slowed due to weaker consumption.

China’s third-quarter smartphone sales declined 9 per cent year on year to 76.5 million units due to weak consumer demand and component shortages, according to a research note from research firm Counterpoint.

Xie Ruifeng, a senior analyst with Shanghai-based semiconductor consulting firm ICWise, said the semiconductor shortage has eased because smartphone markers slashed chip inventories amid sluggish sales.

Bai Lei, a salesman for a Shanghai-based chip designer, said the tight supply chain situation was alleviated primarily because demand turned soft, not because of new capacity coming online.

The risk, then, is that capacity will exceed demand when the new fabs come online. “Demand for end-user devices is slowing, but that has yet to be transmitted to foundries,” Bai said.

News Related

OTHER NEWS

Prince Andrew ‘selling £17m ski chalet to protect assets', Epstein victims' lawyer claims

Andrew bought the alpine lodge in 2014 (Getty/Shutterstock) A lawyer for victims of Jeffrey Epstein has said Prince Andrew might be selling his £17m alpine ski chalet in order to ... Read more »

BBC faces Ofcom probe after alleged 'misreporting' of anti-Semitic incident

The BBC has faced mounting criticism over its coverage of an incident last month, in which Jewish teenagers celebrated Chanukah in Oxford Street – Leon Neal /Getty Images Europe The ... Read more »

Samsung Electronics' operating profit up by 53.3% in Q4

Samsung Electronics building in Seocho-dong, southern Seoul / Yonhap Samsung Electronics’ operating profit was up by 53.3 percent in the fourth quarter of 2021 driven by record annual sales, the ... Read more »

Naver 2021 net surges 20 times amid pandemic

Naver’s headquarters in Pangyo, Gyeonggi Province (Korea Herald DB)South Korea’s top internet portal operator, Naver Corp., said Thursday its net profit jumped nearly 20 times in 2021 from the previous ... Read more »

Tencent quietly updates QQ with Unreal game engine in possible metaverse move

Tencent Holdings has quietly embedded video game engine Unreal Engine into its increasingly obsolete messaging platform QQ, according to an updated version of the app, and analysts say the move ... Read more »

S. Korea holds talks on joining DEPA pact

SEOUL, Jan. 27 (Yonhap) — South Korea held talks Thursday with the three member states of the Digital Economy Partnership Agreement (DEPA) to join the world’s first plurilateral digital pact. ... Read more »

S-Oil shifts to black in 2021

SEOUL, Jan. 27 (Yonhap) — S-Oil Corp. on Thursday reported its 2021 net income of 1.5 trillion won (US$1.2 billion), swinging from a loss of 796.1 billion won a year ... Read more »

S-Oil Q4 net income up 238.5 pct to 410.1 bln won

SEOUL, Jan. 27 (Yonhap) — S-Oil Corp. on Thursday reported its fourth-quarter net income of 410.1 billion won (US$341.2 million), up 238.5 percent from a year earlier. Operating income for ... Read more »

Fix for critical Safari bug out now: iPhone, iPad and Mac users should update immediately

Apple has rolled out new versions of its iOS, iPadOS and macOS operating system, patching up a major security flaw in Safari across all of its devices. This bug leaked ... Read more »

Windows 11 is getting a fresh new email app

Microsoft’s push to update all its classic apps for Windows 11 has now moved on to its email platform. Following makeovers for core tools such as Paint, Word and even ... Read more »

How to watch Resident Alien season 2 online from anywhere

After growing attached to the rural town of Patience, where the locals are just as curious as the alien doing a pretty poor job of pretending to be a human ... Read more »

KCCI chairman to conduct first major reshuffle

The front of the Korea Chamber of Commerce and Industry building (KCCI) / Korea Times file By Kim Hyun-bin The Korea Chamber of Commerce & Industries (KCCI) Chairman Chey Tae-won ... Read more »

Part of one of Elon Musk's SpaceX rockets is expected to hit the dark side of the moon in March

The second stage of a SpaceX rocket is expected to impact the moon on March 4. The rocket, launched in February 2015, sent the Deep Space Climate Observatory into space. ... Read more »

Hyundai-Rotem Q4 net income up 3206.2 pct to 25.7 bln won

SEOUL, Jan. 27 (Yonhap) — Hyundai-Rotem Co. on Thursday reported its fourth-quarter net profit of 25.7 billion won (US$21.4 million), up 3206.2 percent from a year earlier. Operating income for ... Read more »

Samsung logs record sales, 4-year-high operating profit in Q4 on solid chip biz

SEOUL, Jan. 27 (Yonhap) — Samsung Electronics Co. on Thursday reported strong fourth-quarter earnings on the robust performance of its mainstay semiconductor business. Net profit rose 64.04 percent from a ... Read more »

(LEAD) Naver 2021 net surges 20 times amid pandemic

(ATTN: CHANGES headline, lead; UPDATES with more info throughout; COMBINES with a story slugged Naver-Q4 earnings; ADDS photo)By Kim Han-joo SEOUL, Jan. 27 (Yonhap) — South Korea’s top internet portal ... Read more »

Hyundai-Rotem 2021 net income up 129.4 pct to 51.4 bln won

SEOUL, Jan. 27 (Yonhap) — Hyundai-Rotem Co. on Thursday reported its 2021 net income of 51.4 billion won (US$42.9 million), up 129.4 percent from a year earlier. Operating income for ... Read more »

Antiques find new appeal with young, tech-savvy collectors as galleries mint NFTs linked to ancient artefacts

The fusty world of antiques is getting a youthful breath of fresh air, thanks to non-fungible tokens (NFTs). A growing number of art galleries and dealers are using the blockchain ... Read more »

Daewoo Engineering & Construction Q4 net profit down 3.3 pct. to 108.6 bln won

SEOUL, Jan. 27 (Yonhap) — Daewoo Engineering & Construction Co. on Thursday reported its fourth-quarter net profit of 108.6 billion won (US$90.7 million), down 3.3 percent from a year earlier. ... Read more »

Daewoo Engineering & Construction 2021 net income up 71.6 pct. to 484.9 bln won

SEOUL, Jan. 27 (Yonhap) — Daewoo Engineering & Construction Co. on Thursday reported its 2021 net income of 484.9 billion won (US$404.9 million), up 71.6 percent from a year earlier. ... Read more »

(URGENT) Samsung Electronics Q4 sales up 24.4 pct on-year to 76.5 tln won

(END) Read more »

(URGENT) Samsung Electronics Q4 operating profit up 53 pct on-year to 13.8 tln won

(END) Read more »

ICT predictions for 2022 and beyond Becoming a digital-first enterprise has become the priority for most organisations in Asean, says IDC

Accelerating digital transformation remains at the forefront for many organisations. As Asean nations continue to grapple with the pandemic, including the impact on the economy and the way organisations have ... Read more »

(URGENT) Samsung Electronics Q4 net profit up 64 pct on-year to 10.8 tln won

(END) Read more »

Pokémon still has a hold on all of us. Will Nintendo's new game live up to the billion-dollar expectation?

Going on nearly three decades strong, The Pokémon Company continues to catch us all Read more »

As South Korean dramas and films ride wave of international success, how long will China remain off-limits?

When the 2013 Korean drama series My Love From the Star raked in 150 billion Korean won in China, the untapped potential of the Chinese market beguiled and enticed South ... Read more »

How the keto diet helped a Malaysian family tackle health conditions like diabetes, high blood pressure and anxiety, and lose weight in the process

The table is brimming with food at the Farooq household in the Petaling Jaya suburb of Kuala Lumpur, Malaysia. There is creamy spinach, broccoli, cauliflower rice, beef and chicken for ... Read more »

Fox News host Dan Bongino permanently banned from Google's YouTube

YouTube banned Fox News host Dan Bongino, forever deplatforming one of the internet’s most popular conservative commentators. The popular video service run by Google said Bongino tried to circumvent a ... Read more »

Naver Q4 net income down 38.6 pct. to 235.7 bln won

SEOUL, Jan. 27 (Yonhap) — Naver Corp. on Thursday reported its fourth-quarter net income of 235.7 billion won (US$196.8 million), down 38.6 percent from a year earlier. The company said ... Read more »

Naver 2021 net profit up 1842.4 pct. to 16.41 tln won

SEOUL, Jan. 27 (Yonhap) — Naver Corp. on Thursday reported its 2021 net income of 16.41 trillion won (US$13.7 billion), up 1842.4 percent from a year earlier. Operating income for ... Read more »

A brief history of El Salvador's crypto feud with the IMF

Investing in crypto is a risky business — particularly when you’re betting with a country’s future. It’s nonetheless a gamble that El Salvador’s president has been eager to make. Nayib ... Read more »

20 amazing Valentine's Day gifts under $50

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. Some theorize Valentine’s Day was invented by Hallmark to get us ... Read more »

Government publishes Bill to make some pandemic powers permanent

MSPs will debate the legislation to make some powers permanent at Holyrood (Jane Barlow/PA) (PA Archive) The Scottish Government has published a Bill which would make some of its emergency ... Read more »

What cold snap? Macy's has deep discounts on coats, jackets and more during this flash sale

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. The weather outside is frightful, with cold temperatures and blistering wind ... Read more »

The best TV deals under $1,000 to shop before the Super Bowl: Samsung, Vizio and TCL

— Recommendations are independently chosen by Reviewed’s editors. Purchases you make through our links may earn us a commission. We’re closing in on another season finale for football, with Super ... Read more »

Breakthrough at cutting-edge laser lab brings fusion energy closer than ever

Scientists and engineers at the Lawrence Livermoore National Laboratory say they successfully created burning plasma in a laboratory that briefly sustained itself by the heat of its own nuclear fusion ... Read more »

Islamic State fighters surrender after British and US special forces help reclaim Syrian prison

Fighters of the Syria Democratic Forces (SDF) escort two IS members who surrendered near Ghwayran prison in Hassakeh, northeastern Syria – EPA-EFE/Shutterstock/Ahmed Mardnli Hundreds of Islamic State (IS) jihadists have ... Read more »

Your pay rise will be scrapped unless National Insurance hike is cancelled

Britain’s Chancellor Rishi Sunak gives a press conference about the ongoing situation with the coronavirus (COVID-19) outbreak inside 10 Downing Street on March 17, 2020 – Getty Images Europe Employers ... Read more »

This could be the moment the establishment finally takes down Boris Johnson

Boris Johnson faced PMQs on Wednesday afternoon as the country awaits the highly anticipated partygate report – UK Parliament/Jessica Taylor Has the establishment finally decided to move against Boris Johnson? ... Read more »

Netflix's biggest mistakes: 10 costly shows that disappeared without trace

Shows including Jupiter’s Legacy, Gypsy and Marco Polo all got the unceremonious axe from Netflix – Netflix Netflix finds itself in a bit of a fix, with its steadily declining ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic