By Kate Yuan

The total IC output in the Chinese mainland was 80.7 billion pieces in the first quarter, down 4.2% over the previous year, according to the National Bureau of Statistics. This was the most dismal performance since the first quarter of 2019.

JW Insights analysts pointed out that the sluggish consumer electronics market is the main factor causing the decline. In the first quarter, the smartphone sales dropped by 11% with all mainstream mobile phone brands in China experiencing negative growth. The PC market also ended double-digit growth in the past two years and turned to be a 5.1% decline.

Coupled with the impact of the Russian-Ukrainian conflict and order cut, analysts have lowered their forecasts for consumer electronics shipments this year. The chip industry may shift from a comprehensive chip shortage to a structural one.

The pandemic control has further affected the IC production in China’s mainland. A large number of upstream and downstream companies have stopped production in Shanghai and its neighboring city Kunshan, both important cities of China's IC industry. Local fabs including TSMC, SMIC, and Huahong have also reduced output. 

The consumer electronics market is still not optimistic in the second quarter. The OEMs will face piled inventories, inflation, a strong dollar, the Russian-Ukrainian war, and pandemic control, which will greatly reduce the demand for chips. On the other hand, the long-lasting chip shortage in consumer electronics may get significantly alleviated, said JW Insights analysts.