After semiconductor sales shattered records in 2021 amid an ongoing supply shortage, chip manufacturers are forecasting another year of growth in 2022. An overwhelming digital transformation is expected to ramp up this year across multiple industries, which is could subsequently bring over half a trillion dollars to the semiconductor industry.
Tight chip supplies are unlikely to subside before the second half of 2022, and in some cases not until 2023. Demand, meanwhile, could continue to boom until 2025 as the transportation sector undergoes an electric transition and technology spending, while expected to slow this year, remains historically high. While certain risks remain for the chip industry, semiconductor manufacturers are confident 2022 could bring a third straight year of record-breaking revenues.
Related ETF: iShares Semiconductor ETF (SOXX)
Semiconductor Sales End 2021 on a High Note, Look Toward Further Growth in 2022
As the global semiconductor shortage enters its third year, chip manufacturers are projected to shatter both annual revenue records as well as units shipped in 2021. Manufacturers have been ramping up production over the last year, yet sky high demand for semiconductors has still kept supplies tight, a trend that could continue through the new year and into 2023.
According to Evertiq, global semiconductor sales were up 23.5% YoY in November to a total of $49.7 billion, 1.5% greater than the previous month. The Semiconductor Industry Association (SIA) stated the cumulative annual total of semiconductors sold through November was 1.05 trillion, the industry’s highest ever total with a month of data yet to be recorded.
In terms of dollar sales, semiconductors grew 26% in 2021 to an astounding $553 billion worldwide as chipmakers struggled to match the level of unprecedented demand from the COVID-19 pandemic, CNBC writes.
Not only was 2021 a banner year for the industry, but a new report from trade credit insurer Euler Hermes forecasts 2022 to be even more lucrative for chipmakers. Semiconductor sales are expected to grow another 9% this year and cross the $600 billion mark for the first time ever. The firm credits “unusually strong demand” for consumer electronics, higher prices for chips amid tight supplies and an improved product mix as the main reasons for the semiconductor industry’s multi-year outperformance.
Historically, the semiconductor industry tends to have a cyclical nature to it, in which demand for chips surges and manufacturers scramble to build up inventories, eventually leading to a supply glut and a subsequent sales crash.
Bloomberg recently reported on this cycle, noting that the chipmakers have the opportunity to break the trend and post a third straight year of sales increases for the first time in decades. Companies like Intel and Micron have argued the nature of the industry is fundamentally different now due to the fact chips are used in so many products these days rather than just computers and mobile devices. Since much of the global economy is dependent on these chips, semiconductors could remain increasingly hard to come by up until 2023.
Supplies Remain Tight as Automakers, Video Game Manufactures Struggle with Production
Chip supplies have been extraordinary tight over the last year and a half due to a slew of factors ranging from strong electronic demand, global supply chain struggles and a high concentration of production coming from two companies in East Asia – Taiwan’s TSMC and South Korea’s Samsung.
Further, new production cannot come online swiftly, as The Wall Steet Journal notes chip factories can take three years to build and begin operations.
A recent report from Deloitte, highlighted by CEPro, predicts…
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