IC Manufacturers: Destocking Pace Below Expectations

Channel manufacturers' analysis indicates that the current surge in short-term orders within the market may be a transient occurrence. Key observations include the impact of inflation and the Federal Reserve's interest rate adjustments, ongoing developments in the Russia-Ukraine conflict, and the potential spike in demand following the reopening of mainland China.

Within the Integrated Circuit (IC) sector, an illustrative scenario reveals an initial estimation for destocking, involving receiving inventory for 0.5 months and selling for 1 month, with the aim of gradually reducing inventory by 0.5 months. However, actual trends involve receiving inventory for 0.6 to 0.7 months and selling only 0.8 to 0.9 months' worth, resulting in a slower-than-expected inventory reduction. According to a recent IDC report, due to inventory adjustments and subdued demand, the first quarter of this year is expected to witness a 13.8% year-on-year decrease in global semiconductor revenue. Positive growth is anticipated only in the fourth quarter, with an overall projected revenue decline of 5.3% for the year.

Former TSMC President Wei Zhejia is optimistic about demand recovery in the second half of 2023, citing last year's inventory adjustments. He notes that the industry's inventory peaked in the third quarter of last year, with recent inventory experiencing a significant decline, a trend expected to continue in the first half of this year.

United Microelectronics Corporation (UMC) General Manager Wang Shi underscores the challenges facing the global economy in 2023. Elevated customer inventory days, coupled with low order visibility, are anticipated to make the first quarter challenging. This economic downturn is projected to reach its nadir in the first half of this year.