There are indications the overheated semiconductor sector may be cooling off after roughly 18 months of record-breaking demand for silicon, wafers and production gear. However, demand for chip design services remained strong during the previous quarter, registering its highest annual growth rate in a decade.
Electronic system design revenues jumped 14.6 percent on an annual basis to $3.19 billion. The ESD Alliance also reported the industry’s four-quarter moving average, that compares the most recent four quarters with the previous year’s, rose 15.5 percent, the highest annual growth rate since 2011.
The IC design sector was driven by a 27 percent jump in revenues generated by systems-in-package tools. Computer-aided engineering, the combined printed-circuit board and multichip module category as well as EDA services all recorded double-digit growth during the second quarter.
Employment in the IC design sector also increased during the period, up 7.3 percent over the same period last year, the industry group reported.
While demand for chip design technology and talent continues to grow, the early signs of a semiconductor industry correction surfaced in mid-October. For example, SEMI reported that the historic rate of bookings for manufacturing equipment began to slow at the end of the summer. While preliminary booking results for September rose 35 percent on an annual basis, that result marked the third consecutive month of declines for the three-month moving average that peaked in June at an annual rate of 59.2 percent.
Similarly, the growth rate for silicon shipments is forecast to slow next year to an annual increase of 6.4 percent, less than half of this year’s projected wafer shipments, SEMI said.
“The growth momentum is expected to continue in the following years but could be tempered by the slowing pace of the macroeconomic recovery and timing of the wafer manufacturing capacity additions needed to meet growing demand,” said Inna Skvortsovam, the industry group’s market analyst.
Meanwhile, fab capacity for power and compound semiconductors is seen leveling off beginning at the end of this year, with the rate of increase declining steadily through 2024 as fab capacity begins to meet pent-up demand for automotive electronics.
Installed capacity for power and compound semiconductor fabs is projected to reach 10.6 million wafers per month (in 200-mm equivalents) by 2024. China is leading the ramp aimed at meeting surging automotive demand, accounting for about one-third of installed wafer capacity by 2023.
Taken together, the quarterly results indicate a welcome balancing of the IC supply chain as chipmakers at last bring capacity online to meet pent-up demand across the automotive and other consumer sectors.