There’s been some discussion of the profitability of the microprocessor market in the press in the last week, so I wanted to share some of my research to add to the debate. My Figure above shows the profitability (net profit/revenues) of the suppliers in the microprocessor market. I’ve chosen to show this on a rolling 4 quarter basis (i.e. the 4 trailing quarters are shown in each value).
It shows that profitability has had a 4-year cycle – clear even through the massive hike in profitability for these suppliers in 2018 and onwards from 2020 (when the pandemic caused supply chain issues, including the closure of a number of chip plants).
The 4-year cycle of profitability matches market growth in unit shipments and revenue (see my Figure above, where I’ve also used a rolling 4 quarter analysis). If history is to repeat itself I expect the 2 lines to drop significantly from Q3 2022 onwards. The worry that China has its sights on Taiwan (where the largest suppliers are based) should lead to some careful planning for those manufacturers that need these chips.
Information Technology and Communications research
