Semiconductor Industry Faces Challenges in H1 2023, Prepares for Future Growth
The semiconductor industry has encountered significant challenges in the first half of 2023, hindering its growth trajectory despite a successful financial year in 2022. The industry experienced weaker-than-expected development due to various factors, including economic and geopolitical uncertainties, high inflation, and notable inventory corrections at chip manufacturers and their clients. These circumstances led to a decline in demand and a subsequent decrease in wafer volumes. However, unlike historical periods of weakness, the market downturn did not exert pressure on pricing.
The weak demand, coupled with higher depreciation and amortization resulting from investments made, as well as rising unit costs, contributed to a noticeable decline in earnings during H1. The persistence of high inflation left its mark, particularly in terms of raw materials, supplies, and labor costs. In response to these challenges, industry players are diligently working to identify cost-saving opportunities and enhance productivity.
Despite the short-term adversity, experts remain positive about the semiconductor industry’s medium to long-term growth potential. Key growth drivers, such as artificial intelligence, digitalization, and electromobility, continue to shape the industry’s upswing. Furthermore, these trends are fueling an increase in silicon consumption per end device. For instance, the proliferation of 5G-enabled devices is driving higher silicon consumption in smartphones, while the growth of electric vehicles and the expansion of electronic control and assistance systems are leading to increased silicon consumption in the automotive sector. Additionally, the rising role of artificial intelligence is boosting silicon consumption in servers. Responding to the anticipated surge in demand, customers have already initiated extensive expansion plans for the coming years.
To capitalize on the resulting growth potential and align with market developments, industry players are expanding their capacities. Notably, the construction of Siltronic’s 300 mm fab in Singapore is progressing rapidly. This state-of-the-art facility is expected to be completed on schedule and on budget, with the first wafers slated for delivery to customers in early 2024 as planned. A substantial portion of the new capacity has already been allocated through long-term supply contracts with customers.
Despite operating in a declining market, Siltronic’s business and earnings performance in H1 2023 remained solid and aligned with expectations. The company achieved an admirable EBITDA margin of 30.2 percent and a net profit. While facing challenges within the broader industry, Siltronic’s performance demonstrates resilience and adaptability.
In conclusion, although the semiconductor industry faced challenges in the first half of 2023, it remains optimistic about its long-term growth prospects. Factors such as artificial intelligence, digitalization, and electromobility continue to propel the industry forward, bolstering silicon consumption in various sectors. Industry players are actively expanding their capacities to meet future demand, and despite short-term setbacks, their solid performance reflects their ability to navigate challenging circumstances and position themselves for future growth.
