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2022 Chip Forecast: Mixed Signals

Semico CEO talks about what’s ahead.

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Jim Feldhan, president of Semico Research, sat down with Semiconductor Engineering to talk about the outlook for the semiconductor market.

SE: What was your final 2021 semiconductor forecast? What is your 2022 semiconductor forecast?

Feldhan: For 2021, world semiconductor revenues totaled $558 billion and units totaled over 1.1 trillion units. In terms of growth rate, revenues increased 25.7%, and units grew by 20.2% over 2020. Growth for the semiconductor market in 2022 will be significantly lower than in 2021. Dollars will reach $591 billion while units will decrease marginally to 1.06 trillion units.

SE: What are the key chip drivers going forward?

Feldhan: Some of the trends in the industry that will continue to drive growth and consume semiconductors helping to avoid a major down cycle for semiconductors are 5G, auto electrification as well as full EVs, cloud applications, server farms and the spread of artificial intelligence across many end markets. These industries will require higher performance and an increased number of semiconductor chips in order to satisfy higher compute power requirements. Long-term growth demand from the end markets is critical to the success of the semiconductor industry, as all foundries and IDMs have substantially increased their capital expenditures in new fabrication facilities to supply this impending demand for chips.

SE: Any worries that you see?

Feldhan: While the U.S. economy is doing well, there are signs that other economies around the world are slowing. In particular, the second-largest economy, China, has shown signs of weakening economic growth and has cut key interest rates as a result. In some regions, rising costs and interest rates are certainly worrisome. Geopolitical instability and the threat of military action in Europe could always throw a wrench into the economic engine. Oil prices are on the rise and are likely to exceed $100 a barrel this year. The U.S. Fed is looking to curb inflation and slow the economy with up to four interest rate hikes in 2022 as it tries to engineer a soft landing to avoid a major recession.

SE: Any thoughts on the chip shortages? When will they end?

Feldhan: Semiconductor shortages continue to be a popular news topic, especially for the automotive industry. In 2021, the semiconductor industry was able to increase unit production and, in some cases, far exceeded the growth rate of end markets that demand those devices. As in other semiconductor cycles when there have been shortages, companies tend to place double orders in an attempt to secure as much product as possible to keep production lines running. The evidence to support just how much double ordering has occurred in the industry is not clear at this point, but we believe there has been a substantial amount. In prior cycles, excess inventories have been kept secret until the situation becomes undeniable. Some of this double ordering will result in an inventory build; however, the pandemic may have shown companies that carrying inventory may be a hedge strategy for future disruptions. Semico believes the shortages will be mostly resolved in the second half of 2022.

SE: What about the foundry business?

Feldhan: Demand for foundry wafers will continue to be in tight supply for at least the first half of 2022. The lack of 200mm semiconductor equipment continues to hamper capacity expansion of 200mm fabs.

SE: What is your forecast for memory?

Feldhan: DRAM and NAND will once again be driving semiconductor revenues. Total memory is expected to increase 15.2% in 2022. DRAM and NAND will account for 97.6% of memory revenues and 72% of memory units. Final 2021 numbers showed that the DRAM market sold 21.8 billion units representing a 13.4% increase from the prior year. This trend is expected to continue, and in 2022 DRAM units are expected to reach 23.1 billion units representing a 5.8% increase over 2021. As a result of the pandemic and shortages, DRAM revenue in 2021 grew 44.9% over 2020 for a total of $92.96 billion. In 2022, we’ll see a continuation of this growth as DRAM dollars are expected to increase 16.4% to $108.2 billion.

SE: What about NAND?

Feldhan: As for the NAND market, 2021 final data shows units grew 14.2% to 13.1 billion units as compared to 2020. 2022 is expected to see an additional 9.6% growth in units to 14.3 billion units. From a revenue perspective, NAND dollars in 2021 increased 13.1% to $55.9 billion compared to 2020. While memory was in tight supply in 2021, the ASP still fell 1.96% to $4.27. In 2022, we expect to see dollars increase to $64.8 billion representing a 15.8% increase in revenue over 2021.

SE: The U.S. wants to have more fabs. We see Intel expanding here. Thoughts?

Feldhan: In general, having more fabrication facilities in the U.S. is good for local production, employment and the security of supply. Intel is expanding in the U.S. as it is seriously entering the foundry market. TSMC is also making major investments in Arizona with a leading-edge factory. They are not the only foreign manufacturer investing in fab facilities. Samsung is also expanding its capacity in the U.S. The desire to have more semiconductor factories in the U.S. provides a hedging strategy against geopolitical concerns between mainland China and Taiwan.

SE: The European Union (EU) wants do to the same thing. Any thoughts here?

Feldhan: The EU would like to have more wafer fabs in Europe although their overall market is considerably smaller than other regions. It would make sense to have more wafer fabs dedicated to automotive and other specialty semiconductor chips where EU companies excel.



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