Semiconductor Industry Sees Some Recovery with Urgent Orders and Price cConcessions, but Uncertainty Remains

The semiconductor industry experienced a wave of inventory adjustments in mid-2022, which caused mixed views on the business climate. While there have been recent sporadic and urgent orders in the supply chain, some pessimists believe that a full-scale recovery may not be imminent due to weak terminal demand and economic uncertainty. The industry generally experiences inventory adjustments every 3-4 years, and this wave is expected to return to normal in the first half of 2023, with a sharp reduction in the first half of the year to balance to a healthier level.

The gradual decompression of inventory has resulted in better news for the overall supply chain, with customers naturally replenishing small amounts of inventory and the demand driven by the unblocking of mainland China. Although the effect of this is relatively unknown, it may add more imagination to the upcoming May 1st and 618 shopping festivals. Urgent orders have been received by IC design companies, lead frame factories, and consumer electronics companies, and the "Wafer bank" is showing a downward trend. 

In terms of price, the industry has generally made concessions and compromises, with Taiwan’s wafer foundry manufacturers resorting to “disguised price reduction” measures. Despite concerns about price-cutting competition, semiconductor professionals believe that the current space-time environment is different from the past and that geopolitical factors must be considered. As the effect of the U.S. ban continues to spread, major international manufacturers have recently considered the uncertainty of production capacity in mainland China and have continued to decentralize their supply chains, with the trend of "de-sinification" still clear.

The demand for urgent orders has injected some warmth into the industry, but they do not represent long-term order commitments. Although the semiconductor content of electronic products and new application trends such as AI and vehicles are expected to increase in the long run, the industry is still cautious due to concerns about the global economic recession, weak terminal demand, and various major environmental variables. Therefore, this year's trend may only see a moderate improvement quarter by quarter, with the goal of the second half of this year being better than the first half.