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Rocketing chip sales growth to ease off this year, reach $680bn, say analysts

Meanwhile Deloitte says semiconductors are 'growing as fast or faster than ever before'

Semiconductor sales are expected to return to a more realistic growth trajectory this year after a record-setting 2021, analyst house IC Insights said in a study released this month.

It's anticipated chip sales will reach a record-high of $680.6bn (£500bn) in 2022, growing by 11 per cent from 2021. Integrated circuit revenues are expected to total $565.1bn (£415bn), up 11 per cent year-on-year, and OSD – optoelectronics, sensors/actuators, and discrete components – are expected to reach $115bn (£85bn), also up 11 per cent.

The growth rates will be slower than last year, when chip sales went up by 25 per cent from 2020, the analysts said.

The electrification of cars, and pandemic-related changes, particularly the demand for computers and other electronics as people rely more than ever on technology and internet services, will provide stability to an otherwise volatile semiconductor market, Nathan Brookwood, an analyst at Insight 64, told The Register.

Demand for GPUs spiked during the pandemic as people looked for new forms of entertainment while locked down at home, Dean McCarron, president of Mercury Research, told The Register.

Now there's a shortage of GPUs, with crypto miners and scalpers hoarding boards, which are selling at close to three to four times the regular price. Nvidia and AMD expect GPU supplies to improve in the second half of this year.

The chip shortage will linger into 2023, though be less severe, Deloitte said in its year-end technology study. Chip shortages cost Apple $6bn in revenue in the final financial quarter of 2021.

Demand will also be driven by artificial intelligence, cloud and data centers, health care and automotive applications, Duncan Stewart, director of research for Deloitte’s technology, media & telecommunications, told The Register.

"Every end market for semiconductors is growing, and growing as fast or faster than ever before," Stewart said.

The average car in 2010 contained $300 of microchips, and will this likely rise to more than $500 in 2022, Deloitte estimated.

The consultancy giant projects the semiconductor market in 2022 will top $600bn for the first-time ever, up from $412bn in 2019.

A shortage of low-cost chips such as power management ICs – which are critical for electric cars – has worsened and halted production of vehicles. Other low-cost chips such as display drivers and USB-C controllers are expected to curtail personal computer shipments this year.

Everyone was clamoring for the same parts in 2021, and chip factories were caught short on capacity. New fabs are coming online and will be better able supply the market, Brian Matas, vice president for market research at IC Insights, told The Register.

"That's helping to take some of the pressure off pricing," Matas said.

DRAM suppliers were caught short in capacity this year, though new and retrofitted factories coming online in the second half of 2022 could lighten the load, Matas said.

The unpredictable nature of coronavirus remains a wild card for how the semiconductor market will play out this year, Matas said.

A COVID-19 outbreak last month in Xi'an, China, forced Micron and Samsung to scale down operations at DRAM facilities after the city was locked down. That has resulted in a short-term impact on Micron's DRAM supply, though the company hopes to return to normal operations in the city by the end of the month.

The volatile nature of the semiconductor market has subsisted despite consolidation, Matas said. Fewer chip companies are supplying physical parts, though that hasn't taken out the wildness in spending and capacity, which causes the volatility.

The hot-cold nature of the semiconductor market is highlighted by the DRAM and flash sector, which is the biggest segment. The DRAM market collapsed in 2019 after demand from mega data-center builders cooled, and rebounded last year from the pandemic-driven demand for computing equipment, according to IC Insights.

Chip manufacturers typically adjust factories to make products that are in demand. Samsung in 2020 converted lines producing DRAM to make CMOS image sensors due to growing demand for cameras and other visual equipment.

With some help from governments, Intel, TSMC, Globalfoundries, and Samsung are investing billions of dollars in factories around the world. Top chip makers are also spending big dollars to secure chip supplies with multi-year deals. AMD in late December extended its wafer-supply agreement with GlobalFoundries to $2.1bn through 2025, an increase from $1.6bn through 2024. ®

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