Semiconductor downturn forecast | Electronics Weekly

Unit growth is below the industry trend-line. “There’s still no unit growth,” said Penn, “market growth is being driven by ASP not unit growth which is unusual. It’s usually the other way round.”

The industry’s recent dollar growth is alarmingly unprecedented with Q1, normally the weakest quarter of the year, seeing sales grow 25%. “That’s the strongest growth for Q1 over Q4 in the history of the industry,” said Penn. However, he pointed out that the growth was driven by $130 billion of investment in datacentres and that there are signs – such as lenders’ demands for tighter guarantees and higher yields – that the appetite for lending money to build datacentres is weakening.

Semiconductor capex is still dangerously high. “Capex is well above the industry Safe Haven trend-line,“ said Penn, “China is moving towards Safe Haven territory, but last year spent 37% of the worldwide capex (down from 43% the year before) which was three times the justifiable amount based on market share”

“At the bleeding edge, the investment is risky because it’s based on AI demand,” said Penn adding that: “AI needs a revenue generating killer app. Now it’s all about investment, and investment needs a return.”

He referred to some of the more optimistic chip industry growth forecasts such as $1.6 trillion by 2030 and $2.4 trillion by 2035 and  said: “This is NOT going to happen. There is going to be correction. Either AI demand will tank, or the infrastructure won’t be able to keep pace with the demand.” The problem, he said is that: “Everyone wants to be first, even if it’s suicide.”

Penn concluded that: “A forecast now is a pure guess. There could be 100% growth this year and we’ve never ever seen that.” He  quoted Chey Tae-won, the chairman of SK Hynix who, when told by an analyst that his company could make $100 billion profit this year, replied: “That’s good news, but it could just as easily be a $100 billion loss.”