As demand for IT and finished goods slows due to the memory crunch, the semiconductor industry is also expected to see diverging fortunes among corporations. Many market research firms predict that smartphone sales will fall by at least 2% and PC and game console sales will each drop by 5% because of rising memory prices.
On the 27th, the industry said negative analyses have begun to emerge on the earnings outlooks of major fabless (semiconductor design corporations) such as Qualcomm and MediaTek. For Taiwan's MediaTek, the world's largest mobile application processor (AP) corporation, smartphone APs accounted for 53% of total revenue as of the end of the third quarter last year. The explanation is that MediaTek will take the biggest hit from a decline in shipments of APs, one of the components with the highest share of smartphone costs.
A range of semiconductor corporations in communications and power, including display driver ICs (DDIs), are also expected to be adversely affected by the contraction in the mobile market. For DDIs, LX Semicon is moving to offset a decline in smartphone DDI revenue with IT organic light-emitting diodes (OLEDs), while Taiwan's Novatech is also expected to suffer from falling demand, according to industry views.
The earnings of foundry (semiconductor contract manufacturing) corporations with a high share of consumer and IT chips are also a variable. Reuters earlier noted that when demand for finished goods declines, legacy (older) chips often undergo inventory adjustments first, exposing foundry corporations that contract-produce those chips to a cold spell. DB HiTek, which has a high share of 200 mm (8-inch) lines producing older chips such as TV DDIs and power management ICs (PMICs), faces variables including declining legacy chip orders and pricing pressure.
Not only smartphones and PCs but also the automotive market are within the sphere of influence of the memory crunch. Market research firm TrendForce said in a recent report that not only electronics and IT corporations but also automobile corporations are struggling with memory procurement, shaking the ecosystem in those fields. Some automobile corporations are said to be revising car parts designs in anticipation that memory inventory shortages will be prolonged.
Infineon Technologies AG of Germany, one of Europe's leading automotive chip corporations, announced an expense-cutting program citing "weak demand in most end markets," and said "automotive and industrial customers are managing inventories conservatively." NXP of the Netherlands recently mentioned that automobile customers may reduce orders as automotive sales declined, and Renesas, Japan's leading vehicle chip corporation, also announced workforce reductions amid weakening chip demand.
Meanwhile, TrendForce projected that in the first quarter this year, prices of commodity DRAM will rise 55% to 60% from the previous quarter, and NAND flash will climb 33% to 38%. Compal, a Taiwan-based PC contract manufacturing corporation, warned that "the memory crunch could pressure the industry not only this year but into next year," adding that "memory's share of PC costs could grow from the previous 15% to 18% level to as high as 35% to 40%."