Chip market to be hit by value of provides to chipmakers • The Register

Extra purple flags in regards to the semiconductor market are being raised with the information {that a} key provider to chipmakers reminiscent of TSMC is planning to hike costs, which is able to doubtless have a knock-on impact on chip costs.

Japan-based chemical substances firm Showa Denko has warned it expects to boost costs and should have to chop again a few of its unprofitable product strains. The corporate is a serious provider of chemical substances and gases which can be used within the semiconductor manufacturing trade for the creation of silicon wafers and within the etching course of to create chips.

In an interview with Bloomberg, Showa Denko chief monetary officer Hideki Somemiya mentioned the corporate had already raised costs at the least a dozen occasions this 12 months, citing points reminiscent of COVID-19 lockdowns, rising vitality prices and different components. Nevertheless, he confirmed “the present market strikes require us to ask twice the quantity we had beforehand calculated.”

As a result of the chemical substances and gases equipped by Showa Denko and others are important for the manufacturing processes used for semiconductors, any important rise of their prices is liable to be handed on to clients of TSMC and different chip fabrication crops.

This may doubtless result in additional troubles for the semiconductor market, which now seems to be going through a downturn following a 12 months of bumper revenues in 2021 as demand outstripped provide.

Final month, analysis firm Omdia warned that the semiconductor market seems to be flattening out, and mentioned its figures indicated that it reached a plateau within the first quarter of 2022 following 5 straight quarters of document revenues and continuous development in demand.

Earlier than that, IDC analyst mentioned it anticipated that points with the availability of back-end supplies wanted to fabricate chips would trigger shortages to increase by till early 2023, though it nonetheless predicted a great 12 months for chipmaker revenues.

Analysts at monetary providers outfit Jefferies Group additionally warned that the semiconductor trade is going through a listing correction within the second half of this 12 months or early 2023, because of steep inflation, indicators of end-user demand slowing in areas together with PCs, and firms stockpiling parts to offset what has been a fluctuating provide state of affairs.

In the meantime, reminiscence chipmaker Micron additionally solid a cautious notice in its most up-to-date quarterly outcomes announcement. The corporate reported its highest ever revenues, however warned buyers that it was forecasting a 13 p.c drop for the following quarter as PC and smartphone reminiscence demand is falling.

This sort of growth and bust cycle the place producers ramp up manufacturing in response to a peak in demand, resulting in an oversupply state of affairs the place costs fall, shouldn’t be unknown within the semiconductor market, particularly in reminiscence chips.

Earlier this 12 months, Gartner vp for semiconductors and electronics Richard Gordon warned of precisely this, saying that we had seen a peak available in the market that will doubtless be adopted by a correction.

“We have simply seen a basic peak within the semiconductor market – chip shortages, costs rises, stock build-up, all of which led to a really excessive development 12 months and document revenues in 2021. However, it is a cyclical market. scarcity state of affairs is easing; I feel we’re previous the height within the cycle,” he informed The Register on the time.

Gordon commented that the financial indicators weren’t good, with shopper revenue being squeezed by the rising value of residing and elevated taxation, which might result in a fall in spending on objects like private units.

“The underside line is that the trade is heading in to a down cycle, most likely beginning in 2H22 however actually affecting 2023 and 2024 – which means that the trade will transfer from undersupply to oversupply, which is able to put downward stress on semiconductor pricing and lead to a slowdown in income development. The following up-cycle will start in 2025 / 2026,” he predicted. ®