In March 2023, shares in IQE (IQE) fell off a cliff after the supplier of compound semiconductor wafer products announced a decline of approximately £30mn in interim revenues. The reported figure eventually came in at £52mn, a 40 per cent dip from the prior half-year.
The company’s wafers are used in the fabrication of integrated circuits, so their end uses are myriad. It would be logical to assume that demand must be correlated to the level of growth in the global economy – it’s cyclical to a large degree – but that isn’t always immediately obvious because purchasing managers base their decisions on the anticipated demand/supply balance. And that isn’t always a straightforward equation. The chip shortfall that hobbled the automotive sector between 2021 and 2022 provides an example of when assumptions on this score have gone awry, although the pandemic obviously had a severe impact on global supply chains. Purchasing managers across a range of industries reflexively ramped up orders of semiconductors above what was required to ensure sufficient inventory. Surpluses duly followed.
Business leaders have subsequently been highlighting the importance of co-ordinating semiconductor strategy with product strategy within the economy. That’s easier said than done because even when chip demand for most consumer applications is faltering, the economy would still probably witness continuing growth in automotive semiconductor demand as motorists are steadily switching to electric vehicles and autonomous driving systems.