Supply chain inventory slightly lower led by a fabless reduction. We publish our 2Q23 tech inventory analysis with 195 companies following most of the results across globally including Taiwan and China chains. Total tech inventory declined 1 day to 62 days though still 17 days above the post-crisis 2Q 45-day median, and tech hardware was also down 1 day to 52 days, vs the 39-day 2Q median. The better-than-seasonal 1-day drop(vs seasonal +1 day) for the tech supply chain was driven by semiconductor (20% of total tech inventory amount) supplemented by a 1-day decline in downstream tech inventory.

Semiconductor inventory drops from the peak. Total semiconductor inventory across the supply chain was down 8 days QoQ to 123 days while semis ex-memory was also down 6 days QoQ to 121 days, both marking the first sequential decline since 3Q21, though still above the post-crisis median of 81 and 88 days, respectively. The decline during the quarter was driven by fabless -17 days to 115 days, though partially offset by IDMs’ strategic builds up another 4 days QoQ to 156 days. With fabless guiding higher in 3Q23 and their effort to cut foundry wafer orders for consumer/PC applications, the inventory drawdown should continue in 2H23. Stable sales outlook for IDMs though could offset their lower utilization and keep inventory still at the high-end of their long-term range. Our profile in the report also shows display inventory back to normal and server depleting well.

Taiwan 3Q23 sales slightly behind, semis better. Taiwan tech sales through August showed that QTD is tracking behind street 3Q23 expectations with downside from downstream supply chain while semiconductor companies being largely in line. Hardware components are seeing iPhone component pricing pressure, slow conventional server components and slow auto/industrial pull-in. Our report profiles each of our semi coverage
sales, with TWD and conservative guidance driving high-end sales across TSMC, UMC,Mediatek, Realtek, ASE, and Vanguard and ASpeed finally rebounding ~25% in 4Q23, albeit light of full-year street estimates. We also see Vanguard possibly planning 12” overseas fab as main mature fab in the TSMC camp for 2-4 year planning ahead, despite the downturn.