The semiconductor industry is faced with several substantial issues—the continuing rise in design costs for complex SoCs, the decrease in the incidence of first-time-right designs, and the increase in the design cycle time against shrinking market windows and decreasing product life cycles. An additional factor has now been added to SoC design costs with the emergence of complicated software applications intended to run on SoC silicon.
The 3rd Party Semiconductor Intellectual Property (SIP) and the System-on-a-Chip (SoC) markets are undergoing good revenue growth as the world continues to move past the COVID-19 pandemic. Headwinds with weakness in global economies and inflation pose some overall concern, but Semico is assuming any economic downturn will not be long or severe. Augmenting these trends is the emergence of Artificial Intelligence (AI) functionality that is being incorporated in many SoCs and applications.
The semiconductor industry is in the midst of a great deal of upheaval in 1Q 2023, brought on by COVID-19 and geopolitical tensions. With the semiconductor shortages brought on by disruptions caused by the COVID-19 pandemic, announcements in new fab projects and expansions reached a fever pitch in 2022. Moving toward self-sufficiency is a new goal for countries in the wake of the increased level of geopolitical tension around the world.
May 2022 revenues increased 10.6% from April, the largest May increase since 2006. Year-over-year, May revenues were up 19.5% over May 2021. Year-to-date, revenues are up 21% compared to 2021. Looking at units, shipments are down by 0.2%, basically flat compared to 2021 year-to-date. The North American PCB book-to bill ratio was flat compared to April at 1.03. Before April, the last time the ratio was that low was in October 2020. However, a ratio above one is still a positive sign for sales six months from now. The ratio has been above 1.0 since November 2020.
The automotive market is undergoing a tremendous amount of rapid change. Automotive manufacturers are exploring the potential of adding various new functions and reconfiguring existing functions to all include some level of intelligence. This covers the range from merely intelligent functions all the way to fully autonomous driving functions that incorporate some level of Artificial Intelligence.
The ASIC design start landscape has changed due to a number of factors, one of which is the increase in NRE costs for complex ASIC designs. Additionally, companies and silicon designers are still exploring which silicon architectures will be the best fit for applications that include AI. New business models will also be possible using the increased productivity and efficiency brought to business through the introduction of AI capabilities.
Thanks to industry– and supply-chain-wide shortages, semiconductor market revenues in 2021 reached almost $560 billion, breaking the $500 barrier by a wide margin and only five years after the industry broke $400 billion for the first time. Revenue growth was 25.7%, only the sixth time we’ve seen double-digit percentage growth in the past twenty years.
The chip shortage that impacted the electronic supply chain in the first half of 2021 continued to impact the second half of 2021 as demand for electronic products remained high. The outlook for semiconductor sales includes several areas of growth such as above-average demand in the automotive market and continued growth in AI and IoT. Auto sales are projected to remain above average into 2022 as supply chain issues continue to be worked out. Semiconductor manufacturers are rolling out new products incorporating artificial intelligence.
