Semiconductor production is one of the leading indicators for global logistics markets and the signals being sent at present are not good.
Although the mood-music from the sector has been downbeat for at least two quarters, results from leading semiconductor manufacturers over the past week have reinforced the mood of pessimism. Samsung Electronics released an “earnings guidance” on 7th October prior to the full Q3 release on 27th of October. This seems to imply a heavy fall in sales and shipments of both semiconductors and related products. Samsung had already predicted a “slump in demand” in its results in Q2 and this seems to have come to pass. Possibly there has been a double-digit fall in the number of semiconductor units shipped in Q3.
The rival semiconductor producer Micron Technology had reported its quarterly numbers last week. These saw “revenue of $6.64 billion versus $8.64 billion for the prior quarter and $8.27 billion for the same period last year”. The company said that it was experiencing a “weakened near-term supply-demand environment” and that it was “taking decisive steps to reduce our supply growth including a nearly 50% wafer fab equipment capex cut versus last year”.
All of this points to a fairly rapid deceleration in underlying consumer sector and related demand beyond what has already been seen. The implications for airfreight are obvious, however the probability is that other sectors will be affected as well.
There may be significant mitigations. The automotive sector is gradually dragging itself out of the hole that it dug itself in through its mis-management of its semiconductor supply chain and the lower demand for semiconductors from the rest of the economy may accelerate this process. Aircraft production also has considerable room for growth.
What perhaps is of even greater importance in the longer-term is the changing supply chain pattern of the semiconductor sector. Micron Technology has also recently announced an agreement with the US government to “build the largest semiconductor fabrication facility in the history of the United States” at a site in Clay in the state of New York. Although this facility will not open for six or seven years, it is part of a general re-orientation of the supply side of the semiconductor sector. This will obviously have implications for logistics provision in the electronics sector and all of those industries that rely on digital products.
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Source: Transport Intelligence, 11th October 2022
Author: Thomas Cullen