Morgan Stanley "Market Rebound in 2023"... Semiconductor Industry Busy Responding

Morgan Stanley Forecasts Semiconductor Market Recovery in Q2 Next Year
Upswing Timing Sooner Than Previous Market Predictions
Semiconductor Industry Continues Long-Term Investment Compared to Boom Period

Semiconductor image / Source=Pixabay

[Asia Economy Reporter Kim Pyeonghwa] As the global semiconductor market faces a harsh winter, a forecast has emerged predicting a rebound earlier than previously expected, in the second quarter of next year. This outlook comes from the American investment bank (IB) Morgan Stanley, which had predicted a semiconductor winter last year. The semiconductor industry continues to respond to the market by announcing long-term investment plans and adjusting production volumes amid these conditions. However, there is an assessment that if not all companies participate in production cuts, the impact may not be significant.

According to the semiconductor industry and securities firms on the 9th, Morgan Stanley stated in a report on the 4th (local time) that inventory levels could peak between the fourth quarter of this year and the first quarter of next year, after which the situation may improve. They also added a forecast that the semiconductor cycle could recover in the second quarter of next year. The semiconductor market periodically experiences cycles of ups and downs, and the up cycle is expected to arrive in the second half of next year.

This forecast is earlier than the recovery timing previously predicted by the market. The market had anticipated an improvement in semiconductor conditions between 2024 and 2025. In a survey conducted last month by the Korea Chamber of Commerce and Industry targeting 30 domestic semiconductor experts, 58.6% of respondents expected the downturn to continue until after the year following next (2024). It was evaluated that the market is affected not only by a typical down cycle but also by external environmental issues such as supply chain wars between major powers.

The semiconductor market has entered a down cycle due to a chain reaction of inflation, decreased front-end demand, increased inventory, and price declines. Entering the third quarter of this year, the downturn is being reflected in the semiconductor industry's performance. In particular, prices of memory products such as DRAM and NAND flash have notably fallen, directly impacting related companies.

Samsung Electronics announced operating profit for the third quarter of 10.8 trillion won, down 31.73% from the same period last year. Since the semiconductor division accounts for about 60-70% of Samsung Electronics' total operating profit, it was affected by the downturn. American memory semiconductor company Micron recorded sales of $6.64 billion (approximately 9.4288 trillion won) in the fourth quarter of fiscal year 2022 (June-August), down 19.7% from the same period last year. This is the first time in six quarters that Micron's quarterly sales have fallen to the $6 billion range.

The semiconductor industry acknowledges that while there may be differences in the timing of predicting market improvement, the rebound will come, and they are preparing in advance for the upcoming boom. They are announcing long-term investment plans to respond promptly when semiconductor demand increases. Samsung Electronics stated at its event this week that it will strengthen its foundry (semiconductor contract manufacturing) competitiveness by tripling advanced process production capacity by 2027 compared to this year. SK Hynix announced plans to invest 15 trillion won over the next five years to expand its factory (M15X) in Cheongju, Chungbuk. Micron also recently announced plans to expand factories in New York and Idaho, USA.

Production adjustments in the semiconductor industry are also ongoing. Although losses are inevitable due to industry characteristics, these efforts aim to reduce inventory pressure and defend prices amid weak demand. Micron announced it would reduce factory utilization rates by 5% at the end of this year and early next year. Japanese NAND flash company Kioxia also announced it would cut NAND production by 30% starting this month. Market research firm TrendForce mentioned that inventory pressure due to oversupply could continue next year and that many manufacturers need to adjust DRAM production to improve market issues such as supply-demand imbalance.

However, there are opinions that such production adjustments may not easily impact market improvement. Joo Wan Lee, a research fellow at POSCO Research Institute, said, "If large-scale production cuts are made, there is an effect of partially preventing price declines, but if not all companies participate, the market share of the companies cutting production may decrease." He added, "Even if production cuts start today, it takes 2-3 months to affect shipment volumes, so there is a considerable time lag." Samsung Electronics stated at a press conference held in Silicon Valley, USA, on the 5th (local time) that it has no plans for production cuts.

This content was produced with the assistance of AI translation services.