There were ups and downs in the global semiconductor industry in 2022 but according to the Semiconductor Industry Association (SIA) the pattern is consistent with the chip industry’s predictable cycle.
Moreover, the SIA said the current downturn does not change the reality that the long-term growth prospects for semiconductors remains promising.
The downturn is the result of several factors:
- Inflation
- Geopolitical unrest
- Lingering COVID-19 impact
- Decreased consumer spending
- Macroeconomic uncertainty
- Fluctuations in demand for semiconductors
However, the SIA said the structural drivers of industry growth are expected to re-assert themselves and propel continued growth over the long term.
In the State of the Union Address this week, President Biden highlighted the gains in the semiconductor industry and the growth in projects happening in the U.S.
“During tonight’s State of the Union Address, President Biden highlighted last year’s historic enactment of the CHIPS and Science Act, a landmark new law that will greatly strengthen America’s economy, national security and semiconductor supply chains,” said John Neuffer, president and CEO of the SIA. “Companies in the semiconductor ecosystem have responded enthusiastically since the CHIPS Act was introduced, announcing new projects across America totaling hundreds of billions of dollars in private investments and supporting hundreds of thousands of U.S. jobs.”
History repeats
Looking at the long-term trend over the last two decades, the chip industry has shown consistent growth.
Annual sales grew from $139 billion in 2001 to $575.5 billion in 2022, an increase of 313%. During the same period, unit sales of semiconductors grew by 290%, reflecting the increase in demand for semiconductor through the electronics industry.
A recent study by the SIA found that global demand for semiconductor manufacturing capacity is projected to increase by 56% by 2030. This means that chip companies will have to invest in research, design and manufacturing to keep pace. The only matter is where these fabs will be built.
Rising domestic manufacturing
The SIA has been working to increase manufacturing capacity in the U.S. and pushed for government leaders to pass the CHIPS and Science Act, which happened in August of last year. The CHIPS Act will provide more than $50 billion in incentives and funding for chip vendors to build semiconductor manufacturing in the U.S.
In just a few months after the CHIPS Act was passed, nearly $200 billion in private investments and more than 200,000 direct and supported jobs were added to the U.S. economy. The total number of direct jobs in the semiconductor industry alone could reach 312,000 by the end of the decade with the industry supporting a total of 2.1 million direct, indirect and inducted jobs in the U.S. economy, the SIA said.
Since the U.S. pledged to increase domestic chip manufacturing:
- Taiwan Semiconductor Manufacturing Co. pledged to build two fabs in Arizona
- Intel is building four fabs — two in Arizona and two in Ohio
- Samsung is building at the very least one fab in Tyler, Texas
- GlobalFoundries is building a new factory in Malta, New York
- Micron Technology recently broke ground on a new Idaho fab, the first new memory manufacturing fab in the U.S. in 20 years.
And this is likely just the beginning as other companies — such as SK Hynix — weigh building new factories to take advantage of new subsides from the CHIPS Act.
