IC design houses experienced an uptick in orders for consumer electronics devices prior to the mid-year 618 shopping festival in China, but the order pull-in momentum may decelerate in the second half of the year, according to industry sources.
The deceleration is attributed to unclear demand after the 618 shopping festival and the lack of any other large-scale promotional period in the short term.
Industry sources said display driver IC (DDI) makers benefited the most from the pre-618 shopping festival replenishment demand in the first half.
Various peripheral chips for TVs and IT applications, including high-speed transmission ICs and touch ICs also saw decent growth momentum, according to sources. Pull-in momentum for power management ICs (PMIC) began to recover in the second quarter as well.
Although the industry outlook for the overall market in 2023 turned conservative in the second quarter, sources pointed out that short orders for inventory replenishment performed as expected in the first half.
Aside from the momentum from the 618 shopping festival, sources noted extremely low inventory levels as a result of corrections in the second half of last year becoming a driver for short lead-time orders of consumer electronics in the first half this year.
With consumer application chip inventories back up to normal levels, pull-ins in the second half will have to depend on actual market demand, sources said.
While industry players still expect to see pull-ins for the traditional peak season in the second half, whether the momentum will be strong or weak is dependent on a number of factors.
Consumer electronics sales during the 618 shopping festival were barely passable, according to sources; therefore, downstream customers are less confident about pull-ins in the second half.
In the third quarter, the back-to-school season and the launch of new Apple products are the main events. However, sources noted that Apple's new product launches are not closely related to Taiwan's IC design industry and demand from back-to-school shopping is limited, meaning there will be no significant growth momentum for Taiwanese IC design houses in the short term.
According to industry sources, Taiwan-based IC design houses can still look forward to replenishment opportunities from year-end promotions, including China's Double 11 and Double 12 shopping festivals and year-end holiday shopping in the US and Europe. Coupled with new product shipments, IC design houses should still see slight revenue growth in the second half, sources said. However, until customers confirm demand and begin pulling in orders, revenue recovery is likely to remain stagnant.
Industry players predicted that revenue momentum in the second half of this year would be limited and do not expect to see significant growth until 2024.
