The semiconductor industry faces financial challenges because memory prices rise and IT product demand decreases. The market research firms project a decline in smartphone sales of 2% and a 5% decrease in PC and game console sales.
Impact on Fabless Chip Designers
The major fabless semiconductor design companies face negative earnings outlooks according to current financial assessments. The total revenue of Taiwan's MediaTek which leads the world in mobile application processor (AP) manufacturing will suffer because its smartphone AP business generated 53% of its revenue during the third quarter of last year. The company will suffer operational losses because it predicts a decline in AP shipments.
The mobile market contraction will also disrupt display driver ICs (DDIs) and communications and power management sectors. LX Semicon is attempting to offset its decreasing smartphone DDI sales through sales of IT products while Novatek will also suffer from decreasing demand in the DDI market.
Pressure on Foundries and Legacy Chips
The foundries that produce consumer and IT chips face multiple operational difficulties. The first inventory adjustments for legacy chips occur when demand for finished products declines. The downturning market conditions affect all foundries that produce these components. DB HiTek which produces 200mm (8-inch) chips including TV DDIs and PMICs will face dual challenges from potential order declines and price pressures.
Automotive Sector Not Immune to Shortages
The automotive market faces memory crisis impacts in addition to those affecting consumer electronics. The market research firm TrendForce reports that memory supply troubles are creating operational difficulties for automakers which are interrupting their sector operations. Vehicle manufacturers are currently designing new components because they expect a prolonged memory shortage.
Infineon a major European automotive chip company has begun to implement cost-cutting measures because its customers have reduced demand and are practicing conservative inventory management. The Dutch semiconductor company NXP announced that they would decrease their order volume because automotive sales have shown a downward trend. Renesas which leads Japanese automotive chip markets has decided to cut its workforce after realizing that chip demand has decreased.
Forecasts Highlight Scale of Memory Price Hikes
The market faces pressure because memory costs have increased sharply. TrendForce has provided the following forecasts for the first quarter of this year:
- Commodity DRAM Prices: Expected to rise 55-60% quarter-on-quarter.
- NAND Flash Prices: Expected to rise 33-38% quarter-on-quarter.
Compal a Taiwanese PC manufacturer has issued a warning that the memory crisis will negatively impact the PC industry during both this year and the following year. The company observed that memory costs for PCs will rise from 15-18% of total PC expenses to 35-40%.
