Friday, September 15, 2023
The biggest challenge now facing the semiconductor industry is over-capacity, Malcolm Penn, CEO of Future Horizons, told IFS2023 earlier this week.
“The industry is spending capex like there’s no tomorrow, it’s classic Pig Cycle economics,” said Penn.
“In Q1 capex was at an all-time record high, red flags were flying all over the place,” said Penn, “it was the highest capex as a percentage of industry sales we have ever seen. We’re going to have to pay the price for that if it turns into a capacity glut. If it all goes into capacity, the industry will choke on it. It is just not possible for the industry to absorb it all.”
That leaves companies with an unpalatable choice, said Penn: “Flood the market or chuck it away and kill your P&L.”
The manufacturing equipment industry has got some bad news coming – there is a lot of excess capacity which will plague the market for a long time.
Fortunately, there’s a constraint on China in its plans to invest heavily in the industry – a lack of competent people.
China hasn’t got enough skilled people to execute its chip plans, said Penn. “China’s grandiose plans will be delayed, pushed out, adjusted – not all those plans can succeed. They are plans – not real projects. If all these plans came to fruition, the chip market would die.”
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