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Semiconductor market continues to experience uncertainty, IDC finds

With COVID-19 continuing to impact the global economy in its second year, the semiconductor market continues to experience uneven shortages and tight supply, according to analysts IDC.

The general theme for semiconductors in 2021 was shortages in mature process technology nodes. IDC expects tight semiconductor supply to continue through the first half of 2022 as the industry builds up inventory to normal levels.

New COVID-19 surges have slowed manufacturing, but the real concern will be labour shortages. The automotive market continues to be impacted as chips move upstream, limiting automobile manufacturing and driving OEMs to utilise their semiconductor supply for higher value vehicles, which raised the average selling price of vehicles for 2021.

IDC research manager enabling technologies and semiconductors Nina Turner says, "Automotive semiconductors will continue to be a limiting constraint on the automotive market through the first half of 2022, but barring any unforeseen shutdowns or semiconductor manufacturing issues, supply should gradually improve through the second half of the year.

"Adding in the time to manufacture the vehicle, this means the automotive market will begin to improve towards the end of 2022 and into 2023 if there are no other supply chain shocks."

One of the key supply constraints for the semiconductor market was in mature process nodes. While the automotive semiconductor market largely depends on these older processes, many other semiconductors are made on these mature manufacturing process technologies at 40nm and above, such as LCD drivers, power management ICs, power, Auto ICs, and microcontrollers.

According to the IDC presentation, Semiconductor Manufacturing and Foundry Market Assessment, and the forthcoming report, Semiconductor Manufacturing and Foundry Services Market and Technology Assessment, IDC estimates that 67% of semiconductors were manufactured at mature process nodes in 2021.

Utilising largely depreciated assets, these semiconductors are sold at lower average selling prices (ASPs) compared to leading edge process nodes, defined as 16nm or below.

IDC found that while leading edge manufacturing only makes up 15% of the semiconductor wafer volume, revenue from these semiconductors represents 44% of the total.

This disparity helps explain the focus of capital spending on the leading edge for the foundry market and the limited investment in mature process technology manufacturing.

Another key finding outlined in the new report is the continued growth of fabless semiconductor revenues and the continued growth of foundry capacity in Asia/Pacific.

IDC research manager enabling technologies and semiconductor Rudy Torrijos says, "IDC forecasts fabless semiconductor revenues will grow from 41% of the market in 2020 to 49% in 2025, highlighting the sustainable growth of the foundry market. Foundry capacity will continue to grow in Asia/Pacific."

The overall foundry market is forecast to grow at a five-year compound annual growth rate (CAGR) of 12% from 2020 to 2025.

While new fabs and investment announcements are a welcome sign for semiconductor manufacturing capacity over the next five years, this new capacity will not come online in 2022, the analysts state.

Companies are slowly adding what capacity they can, but capacity improvement will be incremental this year and accelerate in 2023 and beyond.

IDC group vice president enabling technologies and semiconductors Mario Morales says, "The shortages that began early last year have given way to sustainable ASP increases for most semiconductor suppliers this year, except in memory.

"Demand remains robust across most system markets but inventory levels by the middle of the year and slower economic activity in the second half could be what ultimately eases the constraints.

"OSAT and material shortages are the new challenge for the semiconductor supply chain, which will require investment over the next couple of years, especially as the ongoing trend toward systems in package accelerates."

The IDC Worldwide Semiconductor Technology Supply Chain Intelligence (STSI) service serves as the basis for IDC's semiconductor supply-side research, including market forecasts and custom market models.

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