Analyst agency: Chinese chips are expected to drop 18%

According to TechInsights statistics, China has maintained its position as the world's largest IC consumer market since 2005, reaching a peak of US$177.3 billion in 2021, but will decline by 7.3% year-on-year in 2022. In addition to $164.4 billion in 2023, it is expected to shrink 18% to $135 billion in 2023 due to the impact of the global economic slowdown, China's COVID-19 policies, and tightening U.S. regulations on Chinese semiconductors.

At the same time, China's share of the global IC market is expected to decline from 34% in 2021 to 31% in 2022 and 29% in 2023. However, even with the decline in market share, China is still the world's largest semiconductor consumer market.

China’s IC market size and changes in China’s IC output value

(Source: TechInsights)

On the other hand, China's IC manufacturing output value (the sum of foreign-invested manufacturing output value and Chinese-invested manufacturing output value) will reach 30 billion US dollars in 2022, of which the Chinese-invested manufacturing output value of semiconductor manufacturers headquartered in China will reach 15.2 billion US dollars. US dollars, an increase of 13% over the previous year.

Global IC market size, China IC market size, and China IC production scale in 2022, including the production scale of Chinese-funded enterprises

(Source: TechInsights)

TechInsights estimates that while Chinese capital will generate $15.2 billion in revenue by 2022, foundries such as SMIC will generate $11.2 billion in revenue, while IDM will generate $4 billion in revenue. SK Hynix, Samsung, TSMC, UMC and other foreign-funded companies with wafer fabs in mainland China are expected to have a turnover of US$14.8 billion.

According to TechInsights forecasts, as the global IC market recovers after 2024, the combined value of Chinese foreign investment and Chinese IC manufacturers will increase from 18.2% of the Chinese IC market in 2022 to 26.6% in 2027.

In the first seven months of 2023, China's imported integrated circuits (ICs) totaled 270.2 billion units, a year-on-year decrease of 16.8%. Although the United States and its allies have implemented stricter trade restrictions, they still show a moderate improvement trend.

The import volume of chips in the first half of the year fell by 18.5% year-on-year, and the import volume of chips in the first three months fell by 22.9% year-on-year.

Data released by the General Administration of Customs on Tuesday showed that China imported 42.4 billion integrated circuits in July alone, a month-on-month increase of 2.6%.

The data comes as China's domestic chip market is slowly recovering from sluggish consumer demand and various economic headwinds.

According to technology research firm IDC, China's smartphone shipments narrowed their year-on-year decline in the second quarter to 2.1%, as discounts on Apple's iPhone 14 helped stimulate local demand and Huawei Technologies Co., Ltd., which was blacklisted by the United States, The company returned to the top five in the market.

China's domestic chip production is also picking up. Data from the National Bureau of Statistics show that in June, my country's integrated circuit output reached 32.2 billion units, a year-on-year increase of 5.7%. April saw the first monthly growth in 16 months.

In the first seven months, total chip imports fell by 21.6% to US$191.3 billion, while in the first half of the year they fell by 22.4%. In contrast, China's overall imports fell by 7.6% during the same period.

According to reports, China's total imports from South Korea plummeted by 24.7% in the first seven to seven months. Washington has reportedly asked South Korea to pressure the country's memory chip makers not to fill a market gap in China caused by Beijing's ban on the sale of certain Micron Technology memory chips.

According to customs data, this was the largest decline among China's major trading partners, followed by a 22.8% drop in imports from Taiwan. Japan, home to chip tool maker Nikon and Tokyo Electron, began restricting the export of 23 types of chip-related equipment and materials in late July.

As a result, China's imports of semiconductor manufacturing equipment from Japan surged by more than 40% month-on-month in June as local chipmakers rushed to stock up on vital machinery.

In addition, from January to July, the export volume of integrated circuits was 151.7 billion units, a year-on-year decrease of 8.3%, and the total value of chip exports decreased by 17.2%.

The Semiconductor Industry Association (SIA) announced today that global semiconductor sales in the second quarter of 2023 totaled $124.5 billion, an increase of 4.7% from the first quarter of 2023 but a 17.3% decrease from the second quarter of 2022.

"While global semiconductor sales in 2023 still lag last year's totals, revenue rose for the fourth consecutive month in June and was a solid month-on-month increase, fueling optimism that the market will continue to rebound in the second half of the year," SIA President and CEO John Neuffer said.

By region, monthly sales increased in the Americas (4.2%), China (3.2%), Japan (0.9%) and Europe (0.1%), but fell slightly in Asia Pacific/All Other (-0.5%) . Year-over-year sales increased in Europe (7.6%), but were higher in Japan (-3.5%), the Americas (-17.9%), Asia Pacific/All Other (-20.4%) and China (-24.4%) decline.

The U.S. Semiconductor Industry Association (SIA) had earlier predicted that semiconductor sales would fall by 10.3% in 2023, but are expected to rebound by 11.9% in 2024. This forecast is derived from forecast data from the World Society for Semiconductor Trade Statistics (WSTS).

The WSTS forecast report shows that due to rising inflation and weak demand in terminal markets such as smartphones and PCs, memory demand is expected to decrease significantly and logic chip demand will shrink. Therefore, the estimate of global semiconductor sales in 2023 is lowered from the 4.1% drop estimated in November 2022 to a drop of 10.3%, and the sales amount is lowered from US$556.568 billion to US$515.1 billion.

By product type, global chip sales in 2023 were revised down to US$412.832 billion from the previous estimate of US$453.041 billion; discrete semiconductor sales were raised to US$35.904 billion from the previous estimate of US$35.060 billion. WSTS pointed out that not all semiconductor demand continues to be depressed. Demand related to electric vehicles and renewable energy will remain strong, while generative AI, whose demand has surged, has also boosted demand for some logic chips.

According to Gartner's latest forecast, global semiconductor revenue is expected to decline by 11.2% in 2023. Data shows that in 2022, the total market volume will be US$599.6 billion, an increase of 0.2% over 2021. The short-term outlook for the semiconductor market has further deteriorated. Global semiconductor revenue is expected to reach US$532 billion in 2023.

Richard Gordon, business vice president at Gartner, said: "As economic headwinds persist, weak demand for electronics in end markets is spreading from consumers to enterprises, creating an uncertain investment environment. In addition, oversupply of chips is pushing up inventory and lowering chip prices, This has accelerated the decline of the semiconductor market this year."

The memory industry is dealing with overcapacity and excess inventory, which will continue to put significant pressure on average selling prices (ASPs) in 2023. The memory market is expected to total $92.3 billion and will decline by 35.5% in 2023. However, it is expected to rebound in 2024, with an increase of 70%.

Although DRAM suppliers' bit production is flat, the RAM market will be severely oversupplied for most of 2023 due to weak end device demand and high inventory levels. Gartner analysts predict that DRAM revenue will decline 39.4% in 2023 to reach $47.6 billion. The market will turn undersupplied in 2024, with DRAM revenue growing 86.8% as prices rebound.

Gartner expects the dynamics of the NAND market to be similar to the DRAM market. Weak demand and large supplier inventories will create oversupply, causing prices to fall sharply. As a result, NAND revenue is expected to decline 32.9% to $38.9 billion in 2023. By 2024, NAND revenue is expected to grow 60.7% due to severe supply shortages.

The semiconductor market for personal computers, tablets and smartphones is stagnant. By 2023, the market will account for 31% of semiconductor revenue, totaling $167.6 billion.

At the same time, the automotive and industrial, military/civilian aerospace semiconductor markets will all see growth. The automotive semiconductor market is expected to grow 13.8% to reach $76.9 billion by 2023.

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