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The Chip Market: Third Quarter Turnaround

After years of challenges, the semiconductor industry reached a turning point in Q3 2023. Positive signals from various market segments, along with a boost from the new iPhone production cycle, strengthened the industry’s resilience to global market fluctuations.

The semiconductor market: On the road to recovery
The semiconductor market: On the road to recovery

The semiconductor industry has seen many ups and downs in recent years. Now, there are signs of a positive turnaround. According to SEMI and TechInsights, IC sales increased significantly in the third quarter of 2023. Demand for high-performance chips, particularly driven by the production of the new iPhone, is boosting the industry. The electronics market recorded a healthy quarterly growth of 10%.

However, this growth is not attributed to higher demand for core products such as smartphones, PCs, and notebooks. In September, Trendforce predicted that the demand for these products would actually decline in the third quarter, leading to lower capacity utilization in manufacturing processes. Instead, the recovery is based on a better alignment of supply and demand, which were heavily skewed in the first half of 2023.

At the time, the global shortage of chips had led to an increase in rush orders. Consequently, semiconductor manufacturers expanded their capacities to meet the rising demand from various market segments, including industrial, communications, and consumer electronics. This expansion resulted in an oversupply of certain chips, putting pressure on prices and capacity utilization.

By the third quarter of 2023, semiconductor manufacturers were able to align their production more accurately with actual demand, thereby increasing their sales.

Stimulus from New iPhone Production and 3nm Process Technology

Taiwan Semiconductor Manufacturing Company Limited (TSMC) expects demand for its semiconductor components to increase, driven by the new iPhone production cycle. Furthermore, the introduction of the 3-nanometer (3 nm) process, representing a new generation of silicon semiconductor chips with higher transistor density, greater speed, and lower power consumption, could provide an additional boost.

Other industry players such as ASML and Nexchip are also indicating positive trends. In terms of financial performance, ASML recorded net sales of 6.7 billion euros and a net profit of 1.9 billion euros in the third quarter of 2023. Nexchip, benefiting from increased demand for LDDI and TDDI components, regained its place among the top ten semiconductor manufacturers.

These developments suggest that the semiconductor industry is recovering from its lows and embarking on a path to growth. The combination of higher demand and new technology cycles could provide further growth opportunities in the fourth quarter.

Recovery and upswing: The semiconductor industry is on an upward trend.


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