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There is a long list of challenges ahead for the chip market — rampant inflation, soaring energy costs, ongoing glitches in supply chains, recent Covid-19 virus lockdowns in China and Russia’s war with Ukraine. Still, IC Insights continues to anticipate an 11 percent increase in total semiconductor sales this year—the same growth rate that was forecast in January.
In fact, revenue in the overall manufacturing industry in the U.S. is expected to grow 9.2 percent this year, despite labor, materials and logistics challenges, reports the Institute for Supply Management. That figure is up from the 6.5 percent increase forecast at the end of 2021.
“With an operating rate of 87.2 percent and projected increases in capital expenditures, prices paid for raw materials and employment by the end of 2022, manufacturing continues its comeback from the turmoil of 2020 and 2021,” said Tim Fiore, chair of the ISM’s manufacturing survey committee. Sixteen out of 18 sectors tracked by ISM – including computers and electronic products — are expecting revenue growth and 13 anticipate hiring this year.
Demand remains solid for semiconductors and manufactured goods, which is one driver of steady growth. The other, experts say, is improved supply chain resilience in the face of two years of unprecedented disruption. Although air freight is more expensive than shipping, orders are expedited every day, according to electronics distributors. Tech companies are designing products with component availability in mind. Cars are manufactured with fewer electronics options, unless customers are willing to wait.
It’s a sellers’ market for everything from materials to automobiles, said Fiore, so costs are being passed on to customers.
A global shortage of semiconductors is not expected to abate until 2024, according to Intel CEO Pat Gelsinger. Although chip companies have announced plans for more than 29 fabs worldwide, it takes several years for a plant to get up and running.
What’s changed?
IC Insights notes a few changes to its forecast from January: How the semiconductor market achieves the low double-digit percentage growth and reaches record-high sales of $680.7 billion in 2022.
As distributors – which have also enjoyed healthy growth – say, “it’s all about the mix.” Even though distributors can’t get as much product as they can sell, lots of components are moving around the channel. At any given time, one category of inventory becomes available for customers waiting in line for those parts.
IC Insights has raised and lowered sales growth forecasts in a number of semiconductor categories. These changes offset each other and keep the overall increase of the semiconductor market at 11 percent in 2022, despite stiffening economic headwinds that are challenging global growth this year, the research firm said.
The sales forecast for microcomponent ICs has been raised to 11 percent from 7 percent earlier this year. This increase is driven by stronger microprocessor sales in the embedded MPU category (now up 12 percent versus 9 percent, previously) and in cellular application processors (rising 22 percent, which is significantly higher than 10 percent in the January forecast). The forecast for analog ICs (up 12 percent) and logic integrated circuits (up 11 percent) hasn’t changed.
IC Insights has lowered the forecast for non-IC semiconductor market categories—optoelectronics, sensors and actuators, and discrete semiconductors (O-S-D), which account for about 17 percent of total semiconductor revenue worldwide. Sales are now expected to rise 9 percent to $113.6 billion versus the previous projection of 11 percent growth in 2022.
Optoelectronics sales will grow only 6 percent because of weak gains in CMOS image sensors and lamp devices (mostly light-emitting diodes—LEDs). However, the weakness in optoelectronics is partly being offset by stronger increases in discrete semiconductors, primarily because of higher increases in sales of power transistors (now expected to be up 11 percent in 2022) and diodes (projected to grow 10 percent) due to tight supplies worldwide and rising average selling prices. The 15 percent growth forecast for sensor/actuator semiconductors remains unchanged.
