By the conclusion of the previous year, prominent investment banks made forecasts indicating that the semiconductor industry would encounter an overabundance of inventory due to the absence of dividends. They also predicted declines in five key semiconductor sectors for 2023: consumer electronics, panels, DRAM, LED, and IC design industries. Now that more than half of 2023 has passed, what are the viewpoints of major semiconductor industry leaders regarding the industry’s current boom? What judgments have they made?

Market Recovery Not As Expected

According to supply chain news, the current conditions in the upstream silicon wafer market are unfavorable. Contract prices are experiencing loosening, and the rate of expansion is likely to slow down. Industry insiders have observed a reversal in overall semiconductor market conditions since the second quarter of the previous year, which has impacted the silicon wafer market as well. In February of this year, the spot price of silicon wafers began to decline, ending a three-year upward trend. Currently, contract prices are also facing loosening, indicating weaker-than-expected demand in the wafer manufacturing sector. Industry experts believe that if the downturn in the silicon wafer market persists, it may affect the future expansion pace of silicon wafer fabs.

Leading silicon wafer companies, such as Global Crystal and Taiwan Sheng Ke, have also analyzed the market situation:

• Xu Xiulan, Chairman of Global Crystal, expressed that the market’s recovery speed is slower than expected. Although the suspension of interest rate hikes in the United States may boost consumer confidence to some extent, uncertainties remain regarding future interest rate adjustments, making the impact on market demand less significant for corporate orders.
• Lin Jiannan, Chairman of Taiwan Shengke, noted that market demand continued to be weak in the second quarter. Customer production capacity utilization rates were not ideal, and challenges persisted. Looking ahead to the second half of the year, factors such as high inflation in Europe and the United States and weak domestic demand may affect the storage market. However, as customer inventory adjustments come to an end and with the support of 5G, generative AI, electric vehicles, and digital centers, the semiconductor market is expected to resume growth.

Regarding the storage sector, there are indications of improvement:

• In June of this year, storage prices stopped falling and consolidated after a 13-month decline. Some product models even experienced a slight rebound. Industry experts suggest that the decline in Micron inventory indicates the possibility of price increases by downstream manufacturers in the coming year. However, the timing of the market’s recovery still requires observation.
• Sanjay Mehrotra, CEO of Micron, stated that the storage industry has passed the bottom of revenue, and profitability is expected to improve as supply and demand gradually reach a balance. Customers are reducing excess inventory, leading to improved price trends and reinforcing confidence that the industry has overcome the revenue trough.
• Li Peiying, general manager of the South Asia Division, mentioned that certain negative factors are expected to gradually subside in the second quarter. Supplier capital expenditure adjustments will help normalize terminal inventory in the second half of the year, stabilizing DRAM demand. The overall consumer electronics market, especially TV, is showing more noticeable improvement, and PC demand in the second half of the year is expected to be better than the first half.
• Jiao Youjun, Chairman of Huabang Electric, stated that the worst phase of the overall semiconductor industry has passed, and while the economy is expected to rebound, the exact timing and strength of the rebound remain unclear. However, market demand has generally returned to normal levels, and mobile phones are anticipated to lead the rebound in demand.
• Wei Gang, Chairman Chen Libai, mentioned that DRAM upstream manufacturers intend to raise prices as larger factories reduce production and benefit from reduced capital expenditures. Spot prices hit the bottom in the second quarter, and a rebound is expected in the third quarter, while contract prices are projected to have bottomed out.
• Pan Jiancheng, CEO of Qunlian, noted that global customers have become more conservative in their spending due to poor economic conditions. This cautious attitude has impacted future demand, leading to a need to observe the demand from system customers in the third quarter. While upstream suppliers are facing significant losses, there is limited room for further price reductions, and the primary variable remains the momentum of demand.

The wafer foundry industry has experienced changes in capacity utilization rates:

• Liu Deyin, Chairman of TSMC, mentioned that customer inventory has been gradually decreasing, and although TSMC may experience a slight negative growth throughout the year, he believes the company has passed the low point in the second quarter performance cycle. TSMC is expected to benefit from long-term trends such as AI, high-speed and cloud computing, and achieve robust growth in the following year.
• Liu Qidong, CFO of UMC, stated that inventory adjustments have been slower than expected, and the semiconductor industry has not seen significant recovery. The atmosphere in the third quarter has remained relatively unchanged, and the demand for the second half of the year has not improved.
• SMIC emphasized the cyclic nature of the integrated circuit industry, with demand fluctuating due to economic factors and supply and demand dynamics. The company observed that the overall integrated circuit industry was still at its lowest point in the first quarter, with robust performance in the industrial and automotive sectors and high inventory in the mobile phone and consumer electronics industry chain. In the long run, chip demand is expected to continue growing, and the company plans to maintain steady operations.
• Huang Chongren, Chairman of LSMC, pointed out signs of inventory improvement and anticipated increased demand related to the 2024 French Olympic Games in the fourth quarter of this year, particularly in the TV and panel sectors. Historical patterns have shown signs of improvement preceding the Olympics.
• The chairman of a world-leading company in the semiconductor industry stated that while there is still uncertainty in terminal consumption, a moderate recovery is expected in the second half of the year. However, the strength of the recovery may vary more than it did a few months ago, and there are still more variables to consider.

Closed beta testing in the semiconductor industry is characterized by conservative client casting efforts:

• Leading closed test manufacturers such as Sun Moonlight and Licheng Technology have been reducing prices due to continuous cost pressures. Prices for 5G smartphone application processors (AP) in closed testing have been falling, and prices for mid-range and entry-level MCU units have also continued to decline to clear out inventories. It remains uncertain whether lower prices will stimulate demand. The market’s trajectory for the rest of the year will be determined by the actions of key players such as Sun Moonlight, Light, and Jingyuan Electricity.
• Wu Tianyu, COO of ASE, acknowledged that the semiconductor market in the first half of the year was affected by destocking and overall market conditions. However, he sees the crisis as a turning point and an opportunity for ASE’s growth amidst global challenges.
• Liu An Xuan, General Manager of Beijing Yuan Electric, stated that visibility for consumer electronics products remains low, and clients are adopting a conservative approach. However, based on the pace of inventory adjustments, customers began reducing inventory in the fourth quarter of the previous year, indicating that there should not be much inventory left in the third quarter of this year.

In addition to the aforementioned insights, leaders from the panel industry also shared their views:

• AU Peng Shuanglang stated that customers have started adjusting inventory, with TVs being the first product to see adjustments, resulting in a faster recovery. IT product inventory levels have returned to a healthy range, or even lower than usual. Consumer product demand has shown signs of recovery, and commercial product demand is expected to improve in the third quarter. Overall, the order situation in the panel industry has improved, and the market’s supply and demand are healthy, with a positive trend anticipated quarter by quarter.
• Hong Jinyang, Chairman of the group, emphasized the expected increase in demand for display panels due to the arrival of the notebook replacement wave. Regarding TV panels, after experiencing

In conclusion, the inventory adjustment of the semiconductor industry is still continuing, and the recovery in the second half of the year will be greater than that in the first half of the year.