Global chip sales could double in 10 years

2022-08-06 0 By

According to the Wall Street Journal website on January 30, the chip industry has just had its best year ever, driven by a global shortage of semiconductors and growing demand.Industry executives expect total sales to double to $1tn in less than a decade.The industry’s total annual sales topped $500bn for the first time in 2021, slightly higher than the global smartphone industry, according to some estimates, the report said.The pandemic has accelerated digital trends, as people use streaming technology to watch movies and play video games, for example, and businesses adopt digital tools — all of which require chips.The chip industry is struggling to keep up with demand for its products, leading to supply shortages and prompting countries to scrutinise chip production activities, prompting government subsidies and a historic wave of investment, the report said.That has set off a race to expand in an industry known for its boom-and-bust cycles.”It’s taken 50 years to grow into a $500 billion industry,” Tom Caulfield, chief executive of GMC, one of the world’s largest contract chipmakers, told reporters.I think it only takes eight to 10 years to reach $1 trillion.”Global chip sales rose about 25 percent year-on-year in 2021 to a record $583.5 billion, according to U.S. consulting firm Gartner.Factories working around the clock are still unable to keep up with demand.A chronic supply shortage is expected to push the industry’s revenues up 9% this year, faster than the historical average.South Korea’s Samsung Electronics Co. has said it believes the good times for its memory chip business will continue.”2022 can only get better,” SAID Pat Gelsinger, CEO of US Intel corp, after the company announced record sales last year.The semiconductor industry’s history worries some analysts, the report said.It has a history of ups and downs as customers sometimes overorder and then pause buying, resulting in a glut of chips.Sceptics fear that potential overcapacity, as well as supply chain disruptions and broader global economic risks, could mean turbulence ahead.Semiconductor industry people say the industry is forecasting explosive growth, reflecting expectations of higher volumes and higher prices.Computers, smartphones, data centers and cars will continue to use semiconductors heavily, and many more products will also need chips.The chip shortage has also led to closer ties between buyers and sellers, reducing the risk of big swings in demand, industry executives say.Peter Hanbury, a partner at Bain & Company who specializes in semiconductors, said much of the growth will come from high-end chips used to power technologies such as machine learning and high-performance computing.However, shortages persist.The Biden administration had warned that US manufacturers’ inventories of key chips had fallen to just five days — down from 40 days a few years ago.Global semiconductor buyers now wait an average of more than 25 weeks for product delivery, well above the accepted ‘healthy range’ of 10 to 14 weeks, according to Hainer Financial Group.Investment by chip makers to increase capacity will not materialize soon, which also keeps supply constrained, the report said.But as new chip plants come on line, the industry could be at risk of overproduction by 2025, bain predicts.According to Andrew Norwood, vice president of research at Gartner, the semiconductor industry is expected to reach $692.5 billion in sales by 2025, and the industry could reach $1 trillion in sales by 2030 if demand hits peak levels.That would be bigger than today’s global fast-food industry.For now, chip makers are busy adding equipment to boost output, says AsML Holdings, a Dutch supplier of advanced chipmaking machines.In a recent earnings call, CEO Peter Wennink said customers opted for quick shipments, forgoing some of the equipment testing typically done at the company before shipping.’Demand is 40% higher than what the company can produce, and that’s going to stay that way for a while,’ he said.Gartner estimates that optimism in the chip industry has led to record capital spending of at least $146bn in 2021, more than double the level five years ago.