Opinions are emerging from all sides that freezing demand for home appliances and mobile devices, driven by rising inflation concerns, is casting a dark cloud over the semiconductor outlook for the second half of the year.

According to the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) has been in the 8.5% range since last March, reaching its highest level in 40 years and clearly demonstrating deepening inflation. With South Korea's consumer prices rising 6% year-on-year in June, there are predictions that the annual growth rate will exceed 5% if current trends continue.

■ Decrease in consumer demand, smooth supply of 8-inch based analog chips
On the 7th, Taiwanese market research firm TrendForce claimed that due to the continued decline in consumer demand during the first half of this year, the utilization rate of 8-inch foundries producing driver ICs, power semiconductors, and image sensors used in consumer electronics such as PCs and TVs may decrease in the second half of this year.

Global inflation fears and rising consumer price inflation have forced the market to lower demand forecasts for home appliances and IT devices. TrendForce has already stated, “Inventory adjustments are being made for smartphones, PCs, and TV-related components such as SoCs, CIS, and PMICs, and companies have begun scaling back foundry and wafer input plans.”

It was mentioned that driver ICs were affected by the decline in demand for TVs and PCs, and were the item with the most severe downward adjustments in wafer input. On the other hand, the supply situation for PMICs, which experienced tight supply in the first half of this year, has become smoother.

It appears that order adjustments are taking place, primarily among companies that placed excessive orders at the time of the supply shortage. TrendForce asserted, “It is difficult to offset the resulting decrease in foundry utilization rates with demand from server, automotive, and industrial applications as order cancellations for driver ICs, consumer PMICs, and CMOS image sensors occur.”

It was projected that the overall utilization rate of fabs producing 8-inch-based analog chips in the second half of 2022 would be 90–95%, and concerns were raised that the utilization rate of some fabs manufacturing more consumer goods might fall short of 90%.

An industry official stated, "During the semiconductor supply shortage, adjustments may be made, such as canceling orders beyond the necessary quantities, regarding excessive orders placed to secure supply."

However, TrendForce predicted that “after experiencing a semiconductor shortage for two and a half years, this short-term cooling of consumer demand will ease foundry utilization rates and allow for the reallocation of resources even to product categories that have struggled with supply shortages.” It also forecasted that utilization rates would remain above 90%, supported by server demand driven by 5G infrastructure and products, as well as cloud services.

■ Warning of a 'Canary in the Coal Mine': Dark Clouds Over the Memory Market

Forecasts suggest that DRAM prices could fall by up to 10% in the third quarter. Amid the continued slowdown in demand for memory semiconductors in the PC and smartphone sectors, news has also emerged that some customers are reducing their semiconductor purchases for the first half of this year compared to original plans due to rising inventory.

In a report by IC Insights on the 11th, this situation was likened to a "canary in a coal mine." In the past, canaries in coal mines were creatures that detected danger signals and sent early warnings. Recently, signs of crisis were detected at Micron, one of the three major memory suppliers, and a Taiwanese semiconductor supplier, leading to them being likened to canaries.

On the 30th of last month, Micron released its earnings for the third fiscal quarter ending in May, recording $8.6 billion, a 19% increase year-over-year; however, it projected a decline of more than 17% to $7.2 billion for the fourth fiscal quarter ending in August. IC Insights explained that Nanya, Taiwan's largest memory supplier, also saw its June revenue plummet by 26% compared to May, illustrating the future of the memory market alongside Micron.

He added that the third quarter of the year marks the peak season for the semiconductor industry, and the downward outlook during this period serves as an early warning of weakness in the memory market in the second half of this year.

With average DRAM inventory levels exceeding two months, smartphone production targets have also continued to be lowered due to the economic downturn, alongside the persistent downward revision of shipment forecasts by PC OEMs. Demand for graphics DRAM has also weakened due to the contraction of the cryptocurrency market, coupled with a decline in demand for consumer goods caused by inflation.


On the 4th, TrendForce forecasted a 5–10% price drop in PC and server DRAM in the third quarter, and adjusted the rate of decline higher than previously projected to 8–13% for mobile, 3–8% for graphics, and 8–13% for consumer DRAM. It is considered highly likely that spot prices will continue to fall until excess memory semiconductor inventory is depleted.

In a semiconductor sector commentary on the 11th, Lee Seung-woo, an analyst at Eugene Investment & Securities, stated, “The utilization rates of 8-inch and 12-inch legacy fabs, which have maintained over 100%, are on the verge of decline,” adding, “If manufacturers begin inventory adjustments amidst concerns over sluggish PC and smartphone sales, the overbooking caused by the pandemic is expected to come to an end.”