Patrick Wang is a senior semiconductor analyst at Evercore ISI, a leading investment banking advisory firm. He has over 15 years of experience analyzing the semiconductor industry and is considered one of the top experts on forecasting trends in the space.

In recent months, Wang has provided sobering guidance on what to expect for the industry in the coming years. After a massive upcycle in 2020 and 2021 driven by pandemic-induced demand, inventory corrections, and supply chain issues, Wang believes the industry is headed for a downturn.

Key factors behind Wang’s cautious view include:

  • Demand Destruction – The pandemic boom that boosted demand for chips used in PCs, smartphones, and data centers is cooling rapidly as consumers pull back spending and enterprise demand normalizes. Wang predicts demand will drop significantly in 2023/2024.
  • Inventory Correction – Companies across the supply chain over-ordered chips during the pandemic shortages. As demand drops, excess inventory will need to be corrected, further reducing new orders.
  • Supply Increases – Massive investments in new fabs and equipment will boost supply in 2023-2024 as new capacity comes online. This will exacerbate the imbalance between supply and demand.
  • Macroeconomic Issues – Rising inflation, higher interest rates, recession fears, and other economic headwinds will undermine chip demand across end markets.

In terms of specific guidance, Wang predicts year-over-year semiconductor sales declines of 8-10% in 2023 and another 3-5% in 2024. Major memory chip makers could be hit even harder with declines up to 20% next year.

Wang believes NAND flash memory chips are most at risk given rapid supply growth. He also sees DRAM markets weakening in 2023 as demand from PCs and smartphones drops.

For logic chips, Wang is cautious on advanced processors from Intel and AMD used in PCs and servers. He thinks these markets will suffer from the demand downturn and inventory correction.

In terms of winners, Wang believes specialty analog chips and auto chips could outperform as they are less impacted by consumer electronics demand. He also thinks too much pessimism is priced into equipment stocks like AMAT and KLAC.

Overall, Wang paints a sobering picture after the explosive growth of recent years. He firmly believes the industry is headed into a significant cyclical correction though he sees growth returning in 2025-2026.

His guidance serves as an important marker for both semiconductor companies and their customers on what to potentially expect. If demand cools as quickly as Wang predicts, it could lead to more inventory write-downs and reduced capital expenditures across the industry.

However, the inherent boom/bust cycle of semiconductors means any prolonged downturn sets the stage for the next upswing. For now though, companies would be wise to prepare for cooler conditions as the red-hot semiconductor market returns to balance over the next two years according to Patrick Wang’s forecasts.

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