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Figure 1. The semiconductor industry goes through boom-and-bust
cycles every few years, with and without macroeconomic recessions.
(DAC 2022 presentation by Charles Shi, Needham. (Source: FactSet,
SIA))
for the last 50 years.
But not all segments of the semiconductor market are poised for
a surplus downturn. Two seem
immune to the larger cyclical pattern
of bust-to-bust. Which segments
are these? To answer that question,
Semiconductor Digest turned to
Charles Shi, Principal Research
Analyst at Needham & Company.
What follows is a portion of that
interview prior to his presentation at
DAC 2022. — John
JOHN BLYLER: The semiconductor
general shortage-to-surplus cycle is
well understood. Is there something
happening this time that makes this
occurrence different?
CHARLES SHI: One thing that has
affected the cycle over the last 2 to 3
years was the appearance of a global
pandemic. As COVID began to strike
the world’s populations and wreak
havoc on the industrial markets,
the semiconductor world was
recovering from its last downturn.
COVID helped the semi market
grow by causing enormous demand
destruction in the service sectors
of the world’s economies. Instead
of traveling, staying in hotels, and
physical goods. And the Feds have
removed the stimulus checks and are
tightening the cost of money to bring
down rising inflation.
All of these are causing an abrupt
change in the macro-environment.
But the semiconductor industry
cannot change that fast. It has too
much inertia. Building new fabs to
increase capacity when demand is
rising takes two years to achieve.
Also, new fabs require complex and
expensive chip-making equipment,
and since many countries are adding
new fabs, the lead time for the nec-
Figure 2. Design complexity grows as the industry enters the chiplet
era. (DAC 2022 presentation by Charles Shi, Needham.)
gathering at restaurants, people
stayed at home and spent more time
and money on physical things, most
of which contained semiconductor
content. And the US government
stimulus checks probably helped the
demand for electronic-based devices
even more.
Now we have entered a different
stage as economies are opening up,
and people are more comfortable
traveling and dining out. We have
moved back to a services economy
instead of one based more on
essary equipment has also increased.
JOHN BLYLER: But that’s not the
whole story for semis, as you mentioned last year. Isn’t one part of
the market holding strong and even
growing?
CHARLES SHI: It’s a different tale in
the world of EDA chip development
tools and intellectual property (IP).
These subsegments — comprised of
companies like Synopsys, Cadence,
Siemens EDA, and Ansys - initially
fell with the rest of the semiconductor market in early 2022 but
12 | Tuesday, July 12www.semiconductordigest.com
