2023 will see a chip glut due to overcapacity

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IDC reports that the global semiconductor industry is showing signs of potential for overcapacity in 2023 as large-scale capacity expansion plans take off. Many of the expansion plans should start churning out chips towards the end of 2022.

Speaking about the industry’s prospects, IDC said that dedicated foundries have been allocated for the rest of this year, with capacity utilization close to 100% capacity. IDC notes that front-end capacity remains tight but fabless suppliers are getting the production needed from foundry partners, adding that front-end manufacturing is starting to meet demand in the third quarter.

Are we out of the woods?

The firm predicts that there are going to be larger issues with shortages remaining in the back-end manufacturing and materials. IDC does not say if, or how, material shortages will ease by 2023. However, the outlook is bullish on manufacturing capacity catching up to demand in that year.

Costs are also predicted to go up, with IDC saying that semiconductor wafer prices increased in 1H21, with expectations that the increases will continue for the rest of the year due to material costs and opportunity costs in mature process technologies.

What else does IDC say?

The note had some market predictions for this year, including:

  • Shortages in automotive silicon will be mitigated by the end of the year, with 22.8% revenue growth
  • 24% revenue growth for x86 servers’ semiconductors
  • 5G silicon will see a boom, with revenue growth expected to hit 128%, faster the overall mobile phone market growth at 28.5%
  • Notebook computer semiconductor revenue growth will hit 11.8%

The semiconductor market as a whole is expected to reach $600 billion by 2025, representing a CAGR of 5.3% through the forecast period, which is higher than the usual 3-4% mature growth recorded in past years.