Semiconductor Market Could Reach ‘Potential Overcapacity’ by 2023: IDC

The analyst firm says the semiconductor industry is expected to generate larger scale capacity expansions beginning toward the end of 2022.

NEEDHAM, Mass. —  The electronic security industry is among an array of global markets that could begin to see relief from the ongoing semiconductor shortage by the middle of 2022.

According to a new report by analyst firm IDC, the semiconductor market is projected to grow 17.3% for the current calendar year. The forecast beats the historical growth of 10.3% registered for 2020, which saw overwhelming demand for microchips from almost all related industries due to the COVID-19 pandemic.

IDC expects the overall semiconductor market to reach $600 billion by 2025, with an expected compound annual growth rate (CAGR) of 5.3%, higher than the historic 3%-4% growth rate. However, an expectation of overcapacity by 2023 — as manufacturers finish bringing online capacity expansions initiated throughout the 2020-2022 period — could bring about a tipping point related to the supply and demand equation.

Semiconductor chips play an essential role in the security industry’s ecosystem by enabling security equipment to function, interoperate with other communication systems and augment traditional solutions to include artificial intelligence (AI), 5G and Internet of Things (IoT) functionalities.

The report indicates that foundry capacity throughout 2021 is allocated at nearly 100%, albeit issues remain from back-end manufacturing and materials procurement. By mid-2022, supply should return to normal, following production capacity expansions coming online. IDC expects this growth to be driven by mobile phones, notebooks, servers, automotive, smart home, gaming, wearables and WiFi access points.

“The semiconductor content story is intact and not only does it benefit the semiconductor companies, but the unit volume growth in many of the markets that they serve will also continue to drive very good growth for the semiconductor market,” says Mario Morales, group vice president, Enabling Technologies and Semiconductors, IDC.

IDC points out that most revenue growth will be led by 5G semiconductor revenues, amounting to a 128% increase. Mobile phone semiconductors are expected to grow by 28.5%. Game consoles (34%), smart home (20%) and wearables (21%) will join the automotive semiconductor revenue increase (expected 22.8%) as shortages are mitigated toward the end of the year and throughout 2022. Notebook semiconductor revenues are expected to grow by a more constrained 11.8%, while X86 server semi revenues will increase by 24.6%.

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