World chip sales growth has decelerated for six straight months in another sign that the global economy is straining under the weight of rising interest rates and mounting geopolitical risks.
Semiconductor sales rose 13.3 percent in June from a year earlier, down from 18 percent in May, data from the global peak industry body showed. The slowdown is the longest since the US-China trade dispute in 2018.
The three-month moving average in chip sales has correlated with the global economy’s performance in the past few decades. The latest weakness comes as concern about a worldwide recession has prompted chipmakers such as Samsung Electronics Co to consider winding back investment plans.
Semiconductors are key components in a world that is increasingly reliant on digital products and services, particularly during the COVID-19 pandemic, when a lot of work and schooling was conducted remotely.
Chip sales started to cool as central banks began scrambling to raise interest rates to combat spiraling inflation, and Russia’s war in Ukraine and prolonged COVID-19 lockdowns in China prompted a rapid reversal in the international outlook.
A Bloomberg Economics global tracker showed the prospects for the world economy have deteriorated rapidly this year, coinciding with chip sales beginning to slow.
Signs of an international downturn are also observed in trade data from South Korea, the world’s biggest producer of memory chips. Growth in chip exports last month eased to 2.1 percent from 10.7 percent in June, the fourth straight monthly decline.
In June, semiconductor stockpiles rose by the most in more than six years.
It is a similar story in Taiwan, which is another key player in electronics supply chains. The latest data indicated that manufacturing in the nation contracted in June and last month, while production and demand slumped, with new export orders registering the biggest fall.
The weakening momentum in these two canaries in the global coal mine is partly due to a slowing economy in China, which continues to impose lockdowns under its “zero COVID-19” policy. China’s factory activity unexpectedly contracted last month and property sales continue to shrink.
In the US, GDP has fallen for two straight quarters, although Cambridge, Massachusetts-based think tank the National Bureau of Economic Research refuses to call it a recession.
In Europe, factory activity plunged in June, further darkening the outlook for the continent and the wider world.
Nonetheless, the IMF still sees a global expansion this year, and slowing chip sales do not automatically indicate a recession is imminent.
However, they offer a glimpse into the health of an international economy that relies heavily on the tiny components to manufacture everything from vehicles to smartphones to computers.
The peak world body — the Washington-based Semiconductor Industry Association — says it represents 99 percent of the US chip industry by revenue and almost two-thirds of non-US chip firms.
The sales it releases are compiled by World Semiconductor Trade Statistics.
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