Asia’s ‘prolonged downturn’ in semiconductors to bottom out by mid-2023, says US-backed ADB

The semiconductor industry saw bumper returns over the pandemic years but inflation and recession pressures have eroded global demand for devices

Geopolitical pressure and China’s zero-Covid policy also chipped at demand but new trends especially in electric vehicles are likely to drive the sector

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Employees work on a semiconductor chip production line in China. The semiconductor industry, largely located in Asia, enjoyed bumper returns over the pandemic years. Photo: via Reuters

Published: 5:08pm, 4 Apr 2023

The “prolonged downturn” in the semiconductor industry that has hit many Asian countries should bottom out by the middle of this year, the Asian Development Bank (ADB) has said in a new report.

The Asian Development Outlook released on Tuesday said that global sales, mostly in memory chips, would decline by just over 4 per cent this year, before the slump that started last August starts to recover.

“The market should recover later this year and into 2024 – a pattern consistent with more recent cycles that suggest the bottoming-out will happen 22 to 25 months after the previous peak,” the ADB report said.

A Chinese microchip is seen through a microscope. Photo: AP

The semiconductor industry, largely located in Asia, enjoyed bumper returns over the pandemic years as demand for consumer electronic goods such as computers and phones boomed amid a rise in work-from-home arrangements.

But global inflation and recession pressures started to weaken global demand for PCs and smartphones, technological consulting firm Garnter said in February.

When the slowdown started last year, it hit mainly high-end semiconductors, affecting Asia’s key technology exporters South Korea, Singapore and Taiwan, although lower-end semiconductors, including Malaysia, the Philippines, Thailand, and Vietnam were better insulated, the ADB said.

In addition, China’s zero-Covid policy also caused severe material shortages and disruptions to the electronics supply chain, forcing up prices and buyers to reconsider purchases, Gartner added.