Penn pegs 22 % fall for global chip market in 2023

Penn (pictured), who was on the money with his prediction of a supercycle in 2021 and its likely demise in 2022, cites a litany of economic pressures covering worse than predicted inflation, higher interest rates, Russia’s weaponisation of oil and natural supplies, China’s aggressive Zero Covid strategy, which is disrupting the supply chain, and the squeeze on disposable incomes.

“The economy is the barometer,” says Penn. “If people aren’t buying so much, there’s no need to make so much. As lead times extended companies over ordered semiconductors for just in case rather than just in time. Now there is excess inventory which will have to be liquidated.”

And a 45 % increase in capex in 2021 will lead to increased capacity coming on stream in the second half of this year leading to over supply.

Penn pegged the start of the downturn for Q3. “It has started a month earlier, June sales tanked 17 % sequentially, and IC prices plunged 18.1 % in June obliterating the 30 % price increase seen over the previous year.”

While the more volatile memory prices have collapsed 20 %, Penn is concerned about a 3.2 % and 2.7 % fall in logic and micro prices respectively. “There is worse to come,” he warns.

“All four driving influences, the economy, unit demand, capacity and prices are showing storm clouds, it doesn’t get much worse.”

Penn is still predicting market growth in 2022, albeit down from his 10 % forecast in January this year to 4 %. He thinks 6 % growth is possible – “but so is 2 % given the magnitude of the June slowdown.”

Next year is bleak, the global economic downturn and a collapsing chip market will lead to a 22 % fall taking sales down to $481 billion.

On the upside Penn who as he remarks –“has been around the block a few times,” – is confident that the industry’s cycle will return the market to single digit growth in 2024, and march on to $1 trillion by 2032.