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2023 semiconductor industry outlook

Balancing shortages with oversupply

As the global semiconductor industry is facing both shortage and oversupply challenges at once, how can companies move forward? Our annual outlook takes a closer look at five major trends in the industry—and how an economic downturn could provide an opportunity for the industry to reset and refocus.

An opportunity for a reset

Heading into 2023, global macroeconomic and geopolitical factors are emerging as the dominant forces shaping the semiconductor industry. Rising interest rates, high inflation, lower consumer confidence, and tech-led stock market retreats have led to a dramatic loss in market capitalization: The top 10 global chip companies’ combined market cap is down 34% from US$2.9 trillion in November 2021 to US$1.9 trillion in November 2022.

In response to the higher cost of capital, inventory drawdowns from customers and the supply chain, and a decline in earnings, many chip companies are cutting costs, reducing employee headcount, and pushing out (but not cancelling) capital expenditures for additional capacity.

But there could be a bright side: A downturn may provide an opportunity for the industry to focus on things other than just trying to catch up during a shortage. As the sections that follow will show, Deloitte anticipates that 2023 could act as the pause that refreshes and allows the semiconductor industry to consider five big things:

  • Bring manufacturing closer to home with both entirely new fabs and the expansion of existing facilities·
  • Manage the diversification risks and challenges that come with localization and friendshoring·
  • Digitally transform and digitize many parts of their processes: financial planning and operations, order management, and supply chain·
  • Address and balance the semiconductor talent equation: shortages in some roles but layoffs in others·
  • Establish and accelerate the path toward achieving environmental, social, and governance goals, particularly around sustainability

Read the full report to learn more about the impacts of semiconductor industry trends, key actions to take, and critical questions to ask.

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