Under the impact of the global COVID epidemic and the China-US trade war, the semiconductor industry this year is "exciting", and market analysts predict that next year 2022 will be no less favourable. In general, starting from the end of 2019 , under the influence of the epidemic, not only the shortage of raw materials, but also news of closures and shutdowns in various places and factories are also heard from time to time. As far as the impact is concerned, the imbalance between supply and demand in the global semiconductor industry has become increasingly serious. On the one hand, the global demand for semiconductor chips continues to rise, pushing up the revenue of the global semiconductor industry in 2021 and 2022; on the other hand, the capacity of wafer manufacturing cannot meet all the needs, resulting in a shortage of semiconductor chips that has become a new usual industrial status. Normally, it is estimated that this situation will be maintained for at least one or two years. In the face of geopolitical development and the imbalance of global semiconductor supply and demand, governments of various countries have actively promoted the development of regional semiconductor supply chains. With the active expansion of production capacity of fabs, the MIC expects that the tight supply and demand will have a chance to ease from the second half of 2022 to 2023. In addition, AI combined with emerging technologies and applications such as the Internet of Things, automotive electronics, and compound semiconductors will drive the continuous growth of demand for more types and quantities of semiconductor components, becoming the main driving force for the growth of the semiconductor industry in the post-epidemic era.

The Institute of Industrial Intelligence ( MIC ) of the Council of Information Technology recently held the " 34th MIC FORUM Fall Breakthrough" online seminar to review and look forward to the trend of the semiconductor industry in 2022 . Institute for Information Industry MIC report noted that 2021 global semiconductor market reached 5,509 billion US dollars, the growth rate of 25.1% ; Looking to 2022 years, the estimated global market will reach 6,065 billion US dollars, the growth rate of 10.1% , which will drive the development of new applications Long-term demand for semiconductor components. However, under the full capacity of manufacturing and packaging and testing, it is expected that the supply and demand imbalance in the chip market will not have a chance to ease until 2022. In the future, we still need to observe the growth rate of the market demand for data centres, edge computing, and automotive applications.

Figure 1.2021 ~ 2022 global semiconductor market grew significantly grow (Source: WSTS , MIC finishing, 2021)

In 2021, the output value of Taiwan's semiconductor industry will reach NT 3.6 trillion (approximately US$ 130.8 billion), with an annual growth rate of 31.8% . The growth in semiconductor demand mainly comes from three aspects: (1) Under the influence of the epidemic, the demand for laptops driven by the housing economy, (2) The smartphone and automotive electronics markets will recover from the second half of 2020, (3) US-China trade war created transfer order effect in market. Since 80% of the world’s laptops are assembled in Taiwan, Taiwan's semiconductor industry will outperform the world in 2021. By the second half of 2021, the growth momentum of semiconductors will shift to emerging applications such as 5G, AI, Internet of Things, and automotive electronics, driven by the demand for laptops driven by the epidemic-related housing economy.

Figure 2. Taiwan's semiconductor industry will show high growth in 2021 (Source: MIC, September 2021)

Observing the semiconductor sub-industry, MIC pointed out that Taiwan’s IC design industry benefited from the market’s demand for mobile computing chips, laptop chips, and large-scale display driver chips in the first half of the year. Revenues grew substantially, and the annual output value exceeded the NT dollar for the first time. 1 trillion, reaching 1.1 trillion yuan ($ 39.5 billion), with an annual growth rate of 33.3%. MIC senior industry analyst Zheng Kai'an said that the demand for chips for terminal products in various application fields will continue to increase, which is conducive to the growth of IC design revenue. However, it should be noted that due to the shortage of global foundry capacity and capacity crowding, some chips will be delivered. Continuous delay, such as microprocessor chip (MCU), power management chip (PMIC) and radio frequency chip ( RFIC ), etc.

Figure 3. The high demand for terminal product chips boosts IC design industry revenue (Source: MIC, September 2021)

Institute for Information Industry MIC said that 2021 wafer manufacturing capacity in short supply, IC manufacturing output flat growth, mainly from product price continued to improve, forecast full-year to NT $ 1.9 trillion (US 688 billion). Zheng Kaian pointed out that the shortage of semiconductor chips has become the new normal in the global industry. Accompanying it, signing long-term contracts and prepaid deposits to ensure production capacity has become a new operating model for foundries. On the other hand, through price increases to reflect costs and increase gross profit, while reducing the imbalance between supply and demand caused by repeated orders, it is estimated that the annual wafer foundry revenue can grow by 20%. Regarding the memory field, the continued growth of DRAM and Flash prices has driven the revenue growth of the three major domestic memory manufacturers. It is expected that DRAM prices and supply will reach a high point in the second half of 2021.

Figure 4. The demand for computing chips drives the growth of advanced and high-end process capacity: the proportion of Taiwan's foundry processes (Source: MIC, September 2021)

Three good things

Analysts pointed out that, so far, three factors have pushed up chip sales:

1.          Demand. "Unusual" consumer electronics demand, such as PCs and smartphones;

2.          Price. Tight supply and dynamic demand drive prices up;

3.          Improvement of product structure. The increases in the price of semiconductor products and the introduction of a new generation of chips have further improved the structure of semiconductor products.

Four major risks

Looking ahead to the new year, analysts believe that with the normalization of demand growth and the accelerated commissioning of new production capacity, the above three market drivers are expected to weaken. In addition, the analysts also pointed out four major risks facing the semiconductor field:

1.          Hardware sales decline. After experiencing strong growth in 2020 and 2021 , demand in the semiconductor industry has returned to normal, and hardware sales ( computers and televisions and other products ) have been hit by a higher-than-expected impact;

2.          Demand in the semiconductor industry weakened. As the new crown pandemic continues to disrupt the supply chain, any long-term stagnation of manufacturing activities will hit semiconductor demand;

3.          The macro technology situation. China and the U.S. compete for technological dominance, and U.S. restrictions on Chinese companies' access to key U.S. semiconductor manufacturing technologies and equipment remain;

4.          Adverse weather events. Facts have proved that "increasing frequency of unusually adverse weather events" is a major challenge facing the semiconductor industry, which relies on optimal capacity utilization to achieve profitability.

Several other factors are expected to "set the tone for the chip industry in 2022”. He pointed out that in addition to the normalization of demand in areas such as PCs and servers, factors such as "unpredictable and random events" will affect major semiconductor manufacturing bases in Taiwan and South Korea.