Paul van Gerven
10 August 2022

An increasing number of signs point to a semiconductor downturn. Chances are that it would merely be an interruption of established long-term semiconductor growth trends.

Micron sounding the alarm has added to fears that the chip boom may be coming to an end. Highlighting the speed at which markets appear to be cooling, the memory maker warned Tuesday that orders had deteriorated compared even to the company update provided only five weeks ago. “Compared to our last earnings call, we see further weakening in demand because of adjustments broadening outside of just consumers to other parts of the market including data centers, industrial and automotive,” CEO Sanjay Mehrotra said in an interview with Bloomberg Television.

Slowing demand in consumer end-markets, most importantly PCs and smartphones, had previously been noted. Last month, TSMC spoke of “softening momentum” in PC, smartphone and other consumer end-markets. ASML, too, saw a slowdown in these segments. Unlike Micron, however, neither company saw worrying signs in data center, automotive and industrial markets. The demand there “is still very, very strong,” ASML CEO Peter Wennink said in July. Nevertheless, investors are rattled by Micron’s comments, which follow disappointing quarterly results from Intel and Nvidia.

Also pointing to a downturn is the first-ever recorded sequential sales decline in June, according to data compiled by IC Insights. Typically, high single-digit or double-digit sales gains are reported in this month. The decrease was mainly caused by “a sudden and dramatic drop in memory IC sales,” according to IC Insights. In addition, the market researcher had previously noted June-over-May sales declines for six of the ten biggest Taiwanese semiconductor suppliers.


IC Insights is currently revising its forecasts and will present updated numbers later this month. Competitor Future Horizons, on the other hand, has already done the math and has proclaimed that “the current semiconductor super cycle is finally drawing to a close and the 17th market downturn has now well and truly started.” CEO Malcolm Penn pointed to scaled-back or postponed capacity expansions at the commodity chip manufacturers, inflation and energy price hikes weighing on consumer spending, scaled-back wafer starts in mature nodes and bloated inventories, among other things.

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Citigroup analyst Christopher Danely didn’t mince words either. “We continue to believe we’re entering the worst semiconductor downturn in at least a decade, and possibly since 2001 given the expectation of a recession and inventory build. We expect every company in our coverage universe and every end-market to experience a correction,” Bloomberg quotes Danely.


Remarkably, industry bellwether ASML didn’t report any reduction in demand a month ago. On the contrary, it took in record bookings in Q2 as the company keeps scrambling to ramp up capacity. Even a moderate recession wouldn’t affect ASML’s packed backlog, Wennink told investors.

Incidentally, most other Dutch semiconductor companies also haven’t given the slightest indication that things may take a turn for the worse. ASM International is in a very similar situation as ASML: it recorded an unprecedented order intake last quarter and can’t make deposition tools fast enough. NXP sees demand continuing to exceed supply. The exception is Besi, which has guided a significant revenue drop for the next quarter, citing weaker market conditions and seasonal trends.

In the end, it probably won’t matter all that much if a downturn is imminent. After all, it would have to be one devastating dip to knock out the underlying trends that chipmakers have been talking about for well over a year now – trends that will produce a trillion-dollar industry by the end of the decade, according to ASML, Semi and several research firms. “There may be a slowdown, but the innovation won’t stop,” Wennink said during a call with analysts to discuss Q2 results, referring to semiconductor-powered technologies being developed for a plethora of different markets.

Case in point: along with its warning, Micron announced government-lubricated 40-billion-dollar capacity expansions through the end of the decade. Intel is building new fabs on two continents, and Samsung and TSMC are expanding their presence in the US.