Friday, September 30th 2022
South Korea's IC Production Slides for the First Time in Years
The economic downturn keeps pushing the PC and related manufacturing markets down, following slumps in demand stemming from increased cost of living, the veritable arms race to technological products during COVID-19, and manufacturer's efforts to increase output to provide enough product to meet said demand. But all that goes up must eventually come down, and now South Korean manufacturers are facing the result of months of decreased consumption, with stock levels increasing ahead of actual product uptake (stocks have reached 67.3% of produced goods and factory shipments have declined 20.4%). This has now led to a 1.7% decline in August's output when compared to the same period last year - the first time the South Korean industry has seen negative growth since 2018.
Samsung and Kioxia both have announced a reduction in production output in the months to come, which should give distribution enough time to clear some of the accumulated inventory. The scales of production typically occur in cycles - ones with excess manufacturing against demand, and other times where the reverse happens. It seems we're now in the descending part of the spectrum, with prices - especially of NAND - being expected to drop in the coming months. It will take a while until the manufacturing reduction makes itself felt in the overall IC pricing landscape. Micron too has announced it's slowing down the production ramp-up of its 232-layer 3D NAND so as not to contribute in excess towards an already over-saturated market.
Luckily for users, this general demand softening will lead to price reductions that aim to increase attractiveness of NAND-based products. It seems that 4Q 2022 will be the best time for users looking to upgrade or add to their storage subsystems, with industry analyst TrendForce expecting a further NAND price slump to the tune of 30% by the end of the year.
Sources:
TechSpot, Bloomberg, TrendForce
Samsung and Kioxia both have announced a reduction in production output in the months to come, which should give distribution enough time to clear some of the accumulated inventory. The scales of production typically occur in cycles - ones with excess manufacturing against demand, and other times where the reverse happens. It seems we're now in the descending part of the spectrum, with prices - especially of NAND - being expected to drop in the coming months. It will take a while until the manufacturing reduction makes itself felt in the overall IC pricing landscape. Micron too has announced it's slowing down the production ramp-up of its 232-layer 3D NAND so as not to contribute in excess towards an already over-saturated market.
14 Comments on South Korea's IC Production Slides for the First Time in Years
collusionaccidents :slap:Then raise prices next year, probably after the global economy is in much better shape!
My guess is that retooling their foundries for a short term production run will be unprofitable. It’s not like semiconductor foundry equipment is cheap or something you can grab at Best Buy and plug into a power outlet in your warehouse.
They would either sell it or scrap it. This equipment is pretty big. It’s not like an old Dell Optiplex or food processor they can just toss in a closet.
They would still need to rip out functioning equipment, maybe reconfigure infrastructure, modify clean rooms, etc. over months to make a low margin product for a short time and then do it all over again?
Not likely. Remember that these in-demand automotive chips aren’t $200 CPUs or GPUs. They’re ICs probably built on 28nm or larger nodes with prices counted in cents, not dollars.
Clearly some people here think these companies just mothball old foundry tools like shoving an old vacuum cleaner or something into a closet in the guest bedroom.
Hell even a restaurant isn’t going to keep their old pizza oven.
During the peak of the semiconductor shortage wafer and substrate availability were biiiggggg problems.
Auto makers are just as guilty as anyone else in relying on JIT supply chain management for parts. They didn’t stockpile a twelve month supply of ICs. Pity.
While they don’t use automotive ICs, Apple often prepays for components and fronts cash to build out new foundries and major capex projects. Guess whose orders get processed first?
I bet Apple had earmarked a bunch of wafers and substrate as well.
My guess is the pandemic caused many procurement managers to review their processes.
Only kicker is hoping to still have a job to be able to buy anything!