The semiconductor industry, after a challenging 2023 marked by an 8.2% decline in global sales to $526.8 billion, is on track for robust recovery and growth in 2024. The downturn was primarily driven by a significant drop in memory chip sales, which decreased by 31% compared to a 1% decline for logic chips. However, sales began rebounding in the second half of 2023, and forecasts for 2024 indicate a 16% growth to $611 billion, driven largely by a surge in demand for memory and logic chips.
Key drivers of this resurgence include the booming generative AI (GenAI) sector, which is spurring demand for high-performance chips in data centers, as well as increased investment in advanced technologies like 5G networks and AI-specific chips. Gartner projects AI semiconductor revenue to reach $71 billion in 2024, a 33% increase from the previous year, fueled by demand in sectors such as data centers, automotive, and consumer electronics.
The geopolitical landscape, particularly the rivalry between the US and China over control of the semiconductor supply chain, also plays a crucial role in the industry’s outlook. Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest advanced chip manufacturer, continues to be a pivotal player, having posted significant growth in revenue due to high demand for Nvidia chips and a recovering smartphone market.
Overall, the semiconductor market is expected to continue its upward trajectory through 2025, with projections of 12.5% growth to reach $687 billion. This growth will likely be sustained by advancements in various technologies, including AI, autonomous vehicles, and high-performance computing, alongside the expansion of new semiconductor fabrication plants worldwide.
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Credit: Alexander Jones, International Banker, September 13, 2024