The cycle continues

Over the last decade plus, semiconductors have continued to expand well beyond computers into the fabric of every day life including automobiles, home appliances, and athletic gear. As that integration into the broader economy became more seamless, many industry analysts predicted that the historic pattern of sharp swings in semiconductor revenue growth would become smoother. However, Covid era supply chain constraints drove a significant shortage in 2020, followed by a surge in semiconductor orders in 2021 and 2022 resulting in an oversupply. This caused industry sales to decline in the fourth quarter of 2022 and into 2023. Although the boon in artificial intelligence development has driven demand for high performance of chips, that strength is offset by the current weakness in smartphone, computer, and related memory chips. Perhaps, one role for AI in the semiconductor industry is to provide enhanced order planning to prevent excess inventory from being built.

Source: Semiconductor Industry Association, Morgan Stanley, July 2023.