Demand for technology is falling. Manufacturers of electronic devices and components for them have problems
Since demand exceeded supply, the prices for products began to rise. So, in May, 2022 representatives of Taiwan Semiconductor Manufacturing Co. (TSMC) officially notified customers about the price increase for various components by 5-9% by 2023. The increase affects almost all of the company’s products. Like last time, TSMC received an additional income – it increased by about a third. CAGR will increase from 15-20% to 35%.
As far as it was possible to judge in the spring of 2022, the deficit for components began to gradually decrease. But, as it turned out, then the downward trend concerned consumer electronics. But the corporate sector was not affected then. We are talking about deploying a 5G infrastructure, increasing the number of data centers, and growing demand for high-performance equipment. TSMC has invested about $40-70 billion, and the company is trying to cover its own costs – of course, not at its own expense.
According to the Nikkei Asian Review, the company’s customers did not even immediately believe in the upcoming price increase. Many considered this disinformation, after rumors about the increased price tag spread. As a result of all this, the Taiwanese company Taiwan Semiconductor Manufacturing Company (TSMC) in January 2022 for the first time became the most valuable company in Asia, bypassing the Chinese Tencent Holdings Ltd in capitalization.
But this is in 2022. Now the situation is different – both with demand and with prices. Perhaps now the cost of the company’s products will go down, because now the supply exceeds demand. And company profits are falling. For example, in June 2023, TSMC product sales fell 11.1% year-on-year. In monetary terms, this is about $5 billion. And the current figures are not the limit, as sales at TSMC have been declining for the fourth month in a row.
What else?
As a result, if companies used to invest huge amounts in the production of semiconductor components, now the flow of investments is beginning to “dry up”. For example, Apple began to spend less on technology development, which rarely saves at all. But now the global demand for its products has declined, the company has to quickly change the forecast values for the production of its equipment. Accordingly, it is necessary to reduce the volume of their orders.
Not only TSMC suffered, but also Foxconn, which previously only heard that its employees work not in one, but two, or even three shifts. Foxconn’s main customer is Apple. According to analysts, in June 2023, Foxconn sales fell by about 20%, falling for the fifth month in a row.
A similar situation is observed in other companies. We recently wrote about the problems of China and its electronics industry. Well, now the corresponding industry in Taiwan has problems. So, in June 2023, sales of 19 Taiwanese companies fell by about 19.8% compared to the same period last year.
Taiwan’s high-tech exports fell 23.4%, the biggest drop since 2009, according to experts. Analysts believe that by the end of the year the situation may improve, but the likelihood of this is not so high.
Be that as it may, the cost of consumer electronics, and, perhaps, corporate systems, will gradually decrease – as has already happened, for example, with video cards, SSDs and other elements. On the one hand, this is good, but on the other hand, no matter how the electronics industry enters a “steep peak”, because of which many enterprises may collapse, and the products of their competitors will become much more expensive. In general, we are now seeing the gradual manifestation of a “perfect storm” in the world of the electronics industry, only not in terms of rising prices and increasing demand, but in terms of falling demand, sales and reducing the cost of products of semiconductor suppliers.
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