The main cause of the fall in the semiconductor market is the sharp decline in unit sales of desktops and laptops, smartphones and tablets over the last twelve months, which has led to a severe drop in unit sales and price of memory, one of the major ingredients in the value of computers and smartphones. According to Gartner, the memory market (DRAM and NAND combined) will fall 35.5% this year to $92.3 billion, although the same consultancy expects it to recover by 2024, with a revenue growth of 70%.
“The era of high memory sales volumes and high prices is over, especially in the computer, smartphone and tablet markets,” says Richard Gordon, vice president of Gartner and responsible for the consultancy’s estimates. As shown in the WSTS chart in the past article, memory revenue accounts for more than a quarter of total integrated circuits. For both 2022 and 2023, WSTS was already forecasting a drop of 12.6% and 17%, respectively, which will be much larger, when in 2021 there was a healthy growth of 30.9%. The sharp fall in the average price of memory, coupled with lower unit sales, is having a devastating effect on the market as a whole.
The main casualties of this decline in semiconductor memory have been its main manufacturers, Korea’s Samsung and SK Hynix, US-based Micron, Japan-US Kyoxia and China’s SMIC. Samsung’s semiconductor division posted an operating loss of $3.4 billion in the first quarter, compared with an operating profit of $6.3 billion in the same quarter of 2022. Compatriot SK Hynix also posted a first-quarter operating loss of $2.5 billion, after losing $1.4 billion in the previous fourth quarter.
The US company Micron posted an operating loss of $2.3 billion last quarter, and both the previous quarter and the next quarter will be of the same order. In addition, it is facing a veto from China, which is investigating it and for the moment Chinese companies are not buying its products until the situation is clarified, which is interpreted as China’s response to the blockade imposed by the United States on the supply of advanced chips. China accounted for 11% of Micron’s sales in 2022 and almost half of its total five years ago. The US government has pleaded with Samsung and SK Hynix not to take advantage of Micron’s situation and not to supply China with orders it will not place with Micron.
US-based Intel is another major casualty of a major drop in sales of computer and server microprocessors, with a first-quarter loss of $2.8 billion, the highest in its history. Strong competition from AMD and NVidia in high-performance graphics, together with a 29% drop in PC sales in the first quarter, according to IDC, as well as the company’s lack of innovative products in PCs this year, partly explain Intel’s financial disaster.
The first quarter figures were complicated, but so were last year’s figures for the companies with semiconductor factories: Samsung, Intel, SK Hynix and Micron, all of which saw their sales fall, by as much as 19.5% in Intel’s case. The only ones that managed to grow were those that outsourced the production of their chips to TSMC, such as Qualcomm, Broadcom, AMD, MicroTek and Apple, in very respectable percentages, as can be seen in the table below of the main semiconductor manufacturers drawn up by Gartner. It is interesting to see that the “others”, the ones that are neither in the top ten nor well known, account for 46% of the total turnover, and they are largely Chinese. China does not make the most sophisticated chips, but it does make the high-volume, low-priced chips that are equally critical to any product.
Turnover of the world’s top ten semiconductor manufacturers
|Ranking 2022||Ranking 2021||Company||Turnover 2022||Quote 2022 (%)||Turnover 2021||Difference 2021-2022 (%)|
Source: Gartner, January 2023. Figures in millions of dollars.
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Albert Cuesta, specialized journalist