For the last several months, most who discussed the topic of semiconductors did so in reference to shortages. Chips were hard to find all over, and numerous markets suffered. Out in Michigan, Ford (NYSE:F) kept an entire lot full of mostly-finished cars that couldn’t be sold for want of some chip or another. A new sign recently emerged that says that trend may be reversing…but not for the reasons you’d expect.
The latest word from the Semiconductor Industry Association shows that worldwide, semiconductor sales are down 18.5% in a year-over-year comparison between January 2023 and January 2022. Of course, the decline isn’t universal. In year-over-year comparisons, the Americas are down 12.4%, Asia Pacific and Other regions are down 19.5%, and the absolute biggest loser is China at 31.6%. However, Japan ticked up 0.7%, and Europe notched up 0.9%, so it wasn’t a complete disaster.
While this seems like an odd development, SIA president and CEO John Neuffer explains why it’s not a disaster staring the entire market in the face. Neuffer notes that there were record-high sales in 2022, but the second half of the year was where the plunges kicked in. Neuffer also looks for the semiconductor market to remain strong because, as we found out, every time we tried to buy something, semiconductors are in just about everything. As for 2023, it could ultimately go anywhere, as supplies start to improve, some demand destruction seems to be kicking in, and the Federal Reserve casting a shadow over all with wildly unpredictable interest rates.
A look at some of the major semiconductor ETFs in the field gives us an idea of what’s going on. The VanEck Semiconductor ETF (SMH) has shown an upward trend over the last three months. Fitting since VanEck focuses on Europe, and European semiconductor purchases are up. The iShares Semiconductor ETF (SOXX) is actually up as well over the last three months, though it’s down off its highs from early February. Finally, the First Trust Nasdaq Semiconductor ETF (FTXL) is also up in the last three months, though also off highs from February.