Cooling semiconductor sales heighten fears of global recession, Auto News, ET Auto

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Global chip sales growth has slowed for six consecutive months – another sign that the global economy is strained under the weight of rising interest rates and growing geopolitical risks.

Semiconductor sales rose 13.3% in June from a year earlier, compared with 18% in May, according to data from the global tech industry body. The current slowdown is the longest since the trade war between the United States and China in 2018.

The three-month moving average of chip sales correlates with the performance of the global economy over the past decades. The latest weakness comes as concern over a global recession prompted chipmakers like Samsung Electronics Co. to consider reversing investment plans.

Cooling semiconductor sales raise fears of global recession
Semiconductors are key components in a world increasingly reliant on digital products and services, especially during the pandemic when much work and study has been done remotely.

Chip sales began to slow as central banks began scrambling to raise interest rates to combat spiraling inflation and Russia’s war on Ukraine and prolonged Covid lockdowns in China caused a rapid reversal of the international outlook.

A global tracker from Bloomberg Economics shows that the outlook for the global economy has deteriorated rapidly this year, coinciding with slowing chip sales.

Cooling semiconductor sales raise fears of global recession
Signs of an international slowdown are also seen in trade data from South Korea, the world’s largest producer of memory chips. Growth in chip exports slowed to 2.1% in July from 10.7% in June, the fourth consecutive monthly slowdown. In June, semiconductor inventories rose the most in more than six years.

It’s a similar story in Taiwan, which is another key player in electronics supply chains. The latest data indicates that manufacturing on the island contracted in June and July, while production and demand fell, with new export orders registering the biggest drop.

The weakening momentum of these two canaries in the global coal mine is partly due to the slowing economy in China, which continues to impose lockdowns as part of its Zero-Covid policy. Chinese factory activity contracted unexpectedly in July and real estate sales continue to contract.

In the United States, gross domestic product has fallen for two consecutive quarters, although the National Bureau of Economic Research refuses to call it a recession. In Europe, factory activity plunged in June, further clouding the outlook for both the continent and the rest of the world.

Cooling semiconductor sales raise fears of global recession
Nevertheless, the International Monetary Fund still sees a global expansion this year, and slowing chip sales do not automatically indicate that a recession is imminent.

But they offer a glimpse into the health of an international economy that relies heavily on tiny components to make everything from cars to smartphones to computers.

The world’s top body – the Washington-based Semiconductor Industry Association – says it represents 99% of the US chip industry by revenue and nearly two-thirds of non-US chip companies. Published sales are compiled by World Semiconductor Trade Statistics.

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