Chip-making machines face a problem of uncertain demand
Global flux has warped the usual cyclicity of this crucial industry
A huge shortage of semiconductors wreaked havoc in many sectors over the past two years. There weren’t enough machines to make the chips, either. To fix the problem, firms announced billions of dollars of capital spending for new facilities. But before these have even come online, there’s already a glut. Companies don’t seem too perturbed, though, nor do investors. Some chip machinery maker stocks are trading at heady valuations. They are finding comfort in the backlog of orders that will tide these firms through troughs. Those that aren’t sitting on cushy buffers will wait it out as they’ve done in years past. SEMI, an industry association, projects a 17% drop in front-end process equipment. For others that cut wafers into chips, a back-end process, sales are likely to drop 9%. The forecast downturn follows record sales of chip-making equipment that rose to $107.6 billion in 2022.