Semiconductors After The Shortage, Specialists Fear Production Overcapacity In 2023

The semiconductor shortage has generated a worldwide movement to increase production capacities. A rush that is similar to the pendulum swing going from one extreme to the other could quickly be at the origin of a crisis of overcapacity. World civilization in the year 2021 is irreparably dependent on semiconductors. Anyone who has tried to acquire a laptop computer during September, teleworkers or remote students, will have noticed that the shelves of stores, digital or physical, are sparse. 

The cause is the shortage of semiconductors and industrial problems, such as the reallocation of production capacities during the first containment or those of the supply chain (maritime transport, scarcity and increasing cost of containers, etc.). The shortage affects the computer market, the automotive market, video games and other sectors as well.

The global shortage of these tiny components is such that governments have seized on the problem, inviting manufacturers to invest and instituting incentive policies. More and more countries are pushing to produce their chips. The Important Project of Common European Interest (PIIEC) on microelectronics and communications technologies is an example of this to preserve Europe’s competitiveness, while other significant regions of the world are stepping up their support programs for their domestic industries.

Overcapacity in 2023 however, this rush will not fail to produce a pendulum effect. Shifting from one extreme to the other, the semiconductor industry is likely to find itself in overcapacity in the years to come. That’s the fear expressed in IDC’s latest market outlook report. The research firm forecasts growth of 17.3% in 2021, against 10.8% in 2020. IDC predicts that the industry “will experience normalization and equilibrium by the middle of the year 2022, with a potential for overcapacity in 2023 when larger scale capacity expansions start to come online towards the end of 2022”.

Admittedly, the market has never been so dynamic, and growing segments drive demand: smartphones, laptops, automobiles, connected objects and home automation. But despite a request that remains strong, IDC s expects IC shortages to continue to ease through Q4 2021, thanks to increased production capacity. Indeed, the foundries are running at full speed now, and it should last a few more months to meet demand. “Production capacities have been allocated for the rest of the year, with almost 100% exploitation,” says IDC.

Rising prices while manufacturers and states are busy, prices continue to climb. The law of supply and demand remains relentless, especially in a period when the needs of businesses and individuals are at their highest. By subdividing production according to market segments, IDC expects 5G semiconductor revenue to grow by 128%, and total mobile phone semiconductor revenue is expected to grow by 28.5%.

Laptop semiconductor revenue will grow 11.8%, while X86 server semiconductor revenue will grow 24.6%. Overall, the semiconductor market will reach $ 600 billion by 2025, a CAGR of 5.3% over the forecast period. The report concludes that this rate is higher than the expected growth of 3-4% observed historically,” the report concludes.

Also Read: Microsoft Teams Makes Hybrid Work Easier With New Features