Assessing the Mid-Point of the Quarter: Stability in Bookings Weakening Outlook for 2H 2023

The semiconductor industry is at a crossroads. After two years of strong growth, demand is starting to slow. At the midpoint of the second quarter, sales and shipments are tracking in line with targets, but bookings remain below billings and backlogs are declining. As a result, the outlook for the second half of the year is more muted.

There are several factors contributing to the slowdown in demand. The global economy is slowing down, which is impacting demand for semiconductors in a number of end markets, including automotive, consumer electronics, and computing.

Inventory levels are still elevated at all levels of the supply chain making it difficult to clear old inventory and make room for new orders. This surplus inventory, combined with slower demand, exerts pressure on pricing as customers become increasingly price sensitive.

Despite the challenges, there are some positive signs within the industry. The automotive sector is displaying signs of stabilization, and the new management team at Vishay is making positive strides. While the outlook for the second half of the year remains uncertain, the semiconductor industry is resilient and well-positioned to navigate these obstacles and emerge stronger.

Key points:

• 2Q sales and shipments are tracking in line with expectations at the midpoint of the quarter, with sales anticipated to be flat to slightly down compared to the previous quarter.
• Bookings are lagging behind billings, with a B2B ratio below 1 across all geographies, and backlogs are declining, indicating a discrepancy between supply and demand.
• The sales forecast for 3Q is predicted to be sub-seasonal and relatively flat. The outlook for the second half of 2023 appears more muted month-over-month, with expectations of a recovery in late 4Q23 or 1Q24.
• Pricing remains unchanged month-over-month, but the industry foresees the need for concessions in 2H23 due to elevated inventory levels, increased supply, and sluggish demand.
  
  

The industry datapoints of interest provide more detail on the challenges facing the semiconductor industry. For example, inventory levels are still elevated at all levels of the supply chain, which is making it difficult to clear old inventory and make room for new orders. This is putting pressure on prices and margins.

While uncertainties exist, the semiconductor industry is well-equipped to overcome these obstacles. The industry is well-positioned to weather the storm and emerge stronger on the other side.