Fitch: global chip manufacturers may face continuous "turbulence"
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Update time : 2022-08-12 10:00:20
Fitch Ratings said that under the situation of geopolitical instability and monetary policy intervention, global semiconductor manufacturers are facing supply chain reconfiguration, and the fluctuations in income and cash flow will intensify. Due to the solid demand of data centers and the serious shortage of automotive chips, more chip manufacturers in non consumer markets will continue to face supply constraints in 2023. However, weak sales of consumer electronics, PCs and smartphones are putting pressure on chip manufacturers in the consumer market, leading to a reduction in their capital expenditure.
The regionalization process of the semiconductor manufacturing industry in Europe and America will initially reduce the production efficiency. Compared with the continuous growth enjoyed by the industry in the past few decades, it is expected that this transformation will lead to continuous fluctuations in income and cash flow in the short term. In the near term, chip manufacturers may make excessive investment in production capacity during the economic recession. The slowdown of global economic growth and the increase of production capacity may be beneficial to the semiconductor supply and demand environment in 2023, and the overcapacity will continue until 2024-2025. Chip manufacturers can flexibly reduce capital expenditure to meet lower than expected demand, but there is a risk of supply shortage when the economy recovers, because factories need a lot of time to prepare for production. Recently, there has been an extremely serious excess demand in semiconductor sales, which is due to the reopening after the epidemic, the recovery of consumption, the superposition of supply chain constraints, resulting in the depletion of inventory, and the fear of supply has further stimulated the manufacturers' demand for defensive inventory. In response, chip manufacturers are actively investing to increase production capacity based on long-term capital expenditure strategic plans. On the positive side, Fitch believes that, driven by technological (such as 5g deployment and artificial intelligence) innovation and growing chip demand, the semiconductor industry is still expected to achieve long-term average single digit growth, which will support the income growth and long-term credit situation of chip manufacturers, and should limit the extent and duration of more typical cyclical recession related to inventory correction.
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