China’s semiconductor industry faces another headache amid lacklustre demand for the low-end chips it has plenty of
- The SEG market in downtown Shanghai, which occupies five floors, was eerily quiet on a recent visit by Post reporters
- Merchants are more concerned by weak demand for mature integrated circuits from the consumer electronics sector than US trade sanctions
An oversupply of low-end semiconductors amid lacklustre demand from downstream sectors such as smartphones and home appliances is worsening in the world’s biggest chip market, according to business merchants.
For vendors at Shanghai’s SEG Electronics Market, a sourcing centre for semiconductor components in the Yangtze River Delta, the headache is not from US trade restrictions on China’s access to advanced chips but weak demand for mature integrated circuits (IC) from smartphone and home appliance manufacturers.
The market in downtown Shanghai, which occupies five floors, was eerily quiet on a recent visit by Post reporters, with few potential buyers and many shopkeepers idle at their booths. Chen Jiaxin, a chip dealer in the market, said the prices for chips used in consumer electronics have been falling over the past two months. “Basically all the consumer electronics companies have been affected by Covid-19, and I don’t see demand climbing back up, even after the price falls,” said Chen.
The manufacturing industry in the Yangtze River Delta was hit hard in April and May when a draconian Covid-19 lockdown in Shanghai and neighbouring areas disrupted production, further dampening demand for industrial inputs. China’s local brand smartphone output shrank 25 per cent in the first half of 2022 by volume, according to the latest data compiled by the China Academy of Information and Communications Technology under the industry ministry.
According to China’s statistics bureau, the output volume of ICs in China fell 8 per cent in the first seven months of 2022 from a year ago.
A merchant who would only give his surname as Yu, said that prices of some semiconductor components for consumer electronics have dropped up to 80 per cent from recent peaks as demand dries up. “Many of our customers have been closed for two or three months and suspended production again during the lockdowns,” Yu said.
Yu added that vendors of commoditised chips usually sell a large volume at a low profit margin, and they cannot make any money when the number of orders dips significantly.
