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: Semiconductor sales top half a trillion dollars for the first time, and are expected to keep growing

Chips sales hit record highs in 2021 amid a continuing global semiconductor shortage, according to a trade group, prompting one Wall Street analyst to hike his already healthy growth estimates for 2022.

In 2021, global chip sales surged 26.2% to a record $555.9 billion, compared with 2020’s $440.4 billion, according to trade group Semiconductor Industry Association Monday. The number of units shipped in 2021 also reached a record 1.15 trillion, as chip makers worked to meet spiking demand after the COVID-19 pandemic upset supply chains and overwhelmed chip-making capacity in 2020.

The number of individual semiconductors sold passed the one trillion mark for the first time in 2018, when annual sales hit $468.8 billion.

“In 2021, amid the ongoing global chip shortage, semiconductor companies substantially ramped up production to unprecedented levels to address persistently high demand, resulting in record chip sales and units shipped,” said John Neuffer, SIA chief executive, in a statement. “Demand for semiconductor production is projected to rise significantly in the years ahead, as chips become even more heavily embedded in the essential technologies of now and the future.”

Read: The semiconductor shortage is here to stay, but it will affect chip companies differently

A category of semiconductors associated with use in the auto industry saw 2021’s highest growth rate, according to SIA. Auto makers were one of the hardest hit industries in the chip shortage causing companies like Ford Motor Co.
F,
-0.51%

and General Motors Co.
GM,
-0.90%

to halt production of vehicles because of a lack of chips. Sales of analog chips surged 33.1% to $74 billion in 2021 sales from the previous year.

Sales of micro integrated circuits, or micro-ICs, rose 15.1% to $80.2 billion in 2021, with sales of those components to the auto industry rising 34.3% year-over-year to a record $26.4 billion, according to SIA.

By category, sales of logic and memory chips accounted for the largest sales groups in 2021 with sales of $154.8 billion and $153.8 billion, respectively. Micron Technology Inc.
MU,
+0.11%
,
a big player in memory chips, is expected to report earnings at the end of March.

In December, world-wide chip sales rose 28.3% to $50.9 billion, and fourth quarter sales rose 28.3% to $152.6 billion from a year ago, according to SIA.

While China remained the largest purchaser in December at $17.6 billion and Asia-Pacific customers were the second largest at $13.6 billion — a 29% and 23% increase, respectively, from a year ago — the Americas logged a 62% surge in purchases to $13.3 billion, according to SIA.

Read: Chips may be sold out for 2022 thanks to shortage, but investors are worried about the end of the party

Following the report, Evercore ISI analyst C.J. Muse raised his 2022 chip sales outlook to $645 billion, 16% higher than 2021, from a previous estimate of $630 billion to $635 billion. Subtracting memory sales from the mix, Muse expects $462 billion, up from a previous forecast of $455 billion.

Muse said his raised outlooks are “based on increasing confidence in supply/demand imbalance extending into CY23, supporting sequential gains throughout the year as incremental capacity becomes available.”

Companies that make the silicon wafers needed to make chips — known in the industry as “fabs” — like Taiwan Semiconductor Manufacturing Co.
TSM,
-0.98%

have dramatically hiked their budgets to build out fab capacity in 2022, while Intel Corp.
INTC,
-0.10%

expects to spend up to $28 billion in 2022 alone.

“We believe that this view is supported by broad-based strength across verticals, a number of key secular growth drivers (AI, Metaverse, 5G, Industrial 4.0, EVs, ADAS, etc.), and meaningful pent-up demand from under-shipments in CY21,” Muse said.

Meanwhile, Intel and Advanced Micro Devices Inc.
AMD,
+0.96%

have reported earnings so far for the holiday quarter with Nvidia Corp.
NVDA,
+1.33%

scheduled to report on Wednesday.

For more: Look back at earnings results from Intel as well as AMD

In 2021, the PHLX Semiconductor Index
SOX,
+0.15%

soared 41%, hitting a record close of 4039.51 on Dec. 27. That’s compared with the S&P 500 index
SPX,
-0.38%
,
which rose nearly 28% in 2021, and went on to reach a record close of 4796.56 on Jan. 3. So far this year, the SOX index is down nearly 15%, while the S&P 500 is off nearly 8%.

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