2023 semiconductor
industry outlook2023 semiconductor industry outlook
Contents
Onshoring, reshoring, nearshoring, friendshoring,
and still some offshoring: Getting the mix right 4
Diversifying with intent and taking a guarded approach 6
Digital transformation and data-driven supply chain networks 7
Addressing the semi talent shortage and the need for specialized skills8
Building a sustainable semiconductor industry 9
Signposts for the future 10
About Deloitte’s outlooks
Deloitte’s 2023 semiconductor industry outlook seeks to identify the strategic issues and opportunities for semiconductor companies and other
parts of the semi supply chain to consider in the coming year, including their impacts, key actions to take, and critical questions to ask. The goal is
to equip semiconductor companies across the semiconductor supply chain with the information and foresight they need to position themselves for
a robust and resilient future.
2 2023 semiconductor industry outlook
Executive summary
It turns out that there may be something In response to the higher cost of capital, inventory drawdowns from
customers and the supply chain, and decline in earnings, many chip
worse for the global chip industry than companies are cutting costs, reducing employee headcount, and
pushing out (but not cancelling) capital expenditures (capex) for
shortage or oversupply: having both additional capacity. To be clear, capex spending for 2023 will still
at once. likely be higher than it was in 2020 but will be lower than previous
expectations for the year.6
Heading into 2023, global macroeconomic and geopolitical factors
There could be a bright side: A downturn may provide an
are emerging as the dominant forces shaping the semiconductor
opportunity for the industry to focus on things other than just trying
industry. Rising interest rates, high inflation, lower consumer
to catch up during a shortage. As the sections that follow will show,
confidence, and tech-led stock market retreats have led to a
Deloitte anticipates that 2023 could act as the pause that refreshes
dramatic loss in market capitalization: the top 10 global chip
and allows the semi industry to consider five big things:
companies’ combined market cap is down 34% from US$2.9 trillion
in November 2021 to US$1.9 trillion in November 2022.1 At one point 1. Bring manufacturing closer to home with both entirely new fabs
in October 2022, the Philadelphia Semiconductor index was down and the expansion of existing facilities—with extensive use of
45% since January and ended the year down 37%.2 friendshoring, as the industry and governments recognize that
no country or region can truly be self-sufficient but also needs to
High-end memory prices are down 50% in the past year, and most rely on trusted friends and allies for parts of its semi
of the phone, personal computer, and data center chip supply chain supply chain.7
has returned to normal lead times. But average lead times for the 2. Manage the diversification risks and challenges that come with
overall industry as of October 2022 were still elevated at about 25.5 localization and friendshoring.
weeks, compared to a more normal 10–14 weeks.3 Moreover, certain
3. Digitally transform and digitize many parts of the process:
kinds of chips (power management and microcontrollers, vital for the
financial planning and operations, order management, and
auto industry and others) are still in severe shortage.4
supply chain.
If all that weren’t enough, the war in Ukraine is disrupting supply 4. Address and balance the semiconductor talent equation:
chains, access to important raw materials, and energy prices shortages in some roles, but layoffs in others.
worldwide—and especially in Europe. These disruptions are 5. Establish and accelerate the path toward achieving
expected to continue into 2023. Additionally, the US government’s environmental, social, and governance (ESG) goals, particularly
steps in October 2022 to tighten the rules around the export ofaround sustainability.
advanced semiconductor technologies to China will likely shape the
entire industry (including the downstream customers) for 2023.5
32023 semiconductor industry outlook
Onshoring, reshoring, nearshoring,
friendshoring, and still some
offshoring: Getting the mix right
In the United States and Europe, the goal for both chipmakers and in the same state, country, or even region as the fabrication plants: a
policymakers is likely to make their domestic industrial capacity chip plant in Arizona might rely on AT in Latin America, while a German
appropriately more self-sufficient, while recognizing that self- fab could rely on AT in Turkey.
sufficiency may be unattainable. As Ursula von der Leyen, president
of the European Commission, said in her remarks introducing the At a high level, policymakers in almost all countries and regions
EU Chips Act: “It should be clear that no country—and even nounderstand that the new supply chain will likely feature a mix of
continent—can be entirely self-sufficient.”8 solutions, and countries should consider rethinking their footprint
based on ongoing developments with trade restrictions. Some parts
After all, “chips” are not a monolithic category: Many kinds of chips may be in our country or region (onshoring); some parts could be
(memory, logic, mixed signal, power semis, etc.) are manufactured in geographies very close to our country or region (nearshoring);
for many different end markets (smartphone chips and PC chips are and some could be in countries that we consider friends and allies
different than chips for cars). Each type of chip may require different (friendshoring). Those countries may be relatively nearby, or they
wafer sizes and process technologies, and require different materials, might be on the other side of the world. As an example, given current
facilities, equipment and design tools, radiation tolerance, and so on. US views, having certain parts of the semi supply chain in Japan or
There are two dominant but different models: the fabless/foundry/ Singapore may be just as far away as China… but still likely preferable.
OSAT (outsourced semiconductor assembly and test) ecosystem,
and the integrated device manufacturing model (IDM), which usually Deciding what mix of onshoring, nearshoring, and friendshoring (while
combines all three roles.almost certainly still relying on offshoring as well) may be best for each
manufacturer or country/region will make 2023 an interesting year.
Manufacturing processes are also diverse, calling on multipleThese decisions could resonate for years to come: New or expanded
semiconducting materials and relying on numerous other inputs (such facilities started in 2023 will likely still be in operation in 2030 and
as specialized epoxies) and a vast array of fabrication, testing, and beyond, and so will their supply chain linkages. And the trade-offs
assembly equipment. Sometimes, there is only a single manufacturer involved could reach far beyond just governments or chipmakers:
or source for a critical part. And concentrating facilities can increase As an example, the auto industry relies on different chips than
risks: any given plant or cluster can be shut down by drought, smartphone companies—and usually employs many more workers,
earthquake, fire, flood, military conflict, pandemic, power shortage, or with consequent political implications. Moreover, buyers of chips are
typhoon, among other causes. beginning to express preferences for where chips are made, not just
what they do and how much they cost.9
Finally, given the realignment of leading-edge manufacturing in North
America and Europe, the US and European semiconductor makers
may have to locate m