SLL has posted many articles on collapsing demand and prices for natural resources, shipping, and railroad freight. For those who dismiss that as “old economy,” and thus not an indicator of where the US economy is headed, here’s a new economy indicator that looks punk. From Adnrew Zatlin at moneyballeconomics.com:
Silicon Wafers and What They Tell Us
Collapsing demand for silicon wafers is signaling further global economic slowdown.
Silicon wafers are the raw material used for semiconductors. It’s the pig iron that gets turned into steel, the concrete that becomes roads. Except that semiconductors have a far broader and deeper reach in the 21st century economy. That is, demand for silicon is a pure reflection of economic demand, but just slightly in the near future since that silicon has to be turned into semiconductors first and then integrated into things to then get sold.
Simply put, in a growing economy where production and durable goods demand is expanding, silicon wafer demand is growing.
As the chart shows, unit growth has collapsed to 0% year over year.
Demand for semiconductors has stopped growing. If we were talking about automobiles and I said that car tire sales have stopped growing, you would immediately say, “Then that means car sales have stopped growing.” In this case, I’m saying that silicon wafer sales are a proxy for the entire global economy, and it has stopped growing, and conditions are worsening.
The wafer market is very concentrated: 97% of wafers are made by just five companies, dominated by Japan. Shin Etsu and SUMCO deliver 60% of the world’s demand for silicon.
The latest Japanese data from the Ministry of Economy, Trade and Industry shows that Japan’s silicon wafer production in October contracted -6% y/y, and that’s in unit terms. The implication is that 4Q will see wafer sales go from no growth to outright contraction.
To continue reading: Semiconductors: Global Ecoomic Growth Continues to Decelerate
