Strong gusts for semiconductors

This is probably the best way to summarize what is happening on the semiconductor market. The industry is in troubled waters, even if the downward trend in sales was initially halted in the second quarter of 2023 thanks to a surprising turnaround.

However, as Future Horizons, a consulting firm for the semiconductor and electronics industry, clearly analyzed in its webinar 'Semiconductor Industry Market Forecast' IFS2024 on 16 January 2024, the recovery is initially based solely on an increase in IC prices (ICASP). The number of units sold (IC units) is still in the basement due to continued buyer reluctance. Malcom Penn, CEO of Future Horizons, does not expect the market to bottom out until the first quarter of 2024, as he emphasized to PLUS.

The market research company Gartner has published figures on the semiconductor market for 2023. According to Gartner's preliminary results, global sales in the semiconductor industry would have amounted to USD 533 billion in 2023, which would have corresponded to a decline of 11.1% compared to 2022. Not all declines can be explained by the cyclical nature of the industry. For example, sales of storage products were down 37% in 2023, according to Joe Unsworth, VP Analyst at Gartner for Semiconductors, Flash Memory and SSD. In contrast to memory vendors, most non-memory vendors saw a relatively benign pricing environment in 2023, Unsworth said: "Demand for non-memory semiconductors for AI applications was the strongest growth driver". The automotive sector (especially electric vehicles) and the defense and aerospace industries also achieved above-average results.

Dynamics of the semiconductor industry in 2023

"Demand for non-memory semiconductors for AI applications was the strongest growth driver"
Joseph Unsworth

In economically challenging times, such as 2023, it is often particularly clear which companies have been able to adapt to the new situation and how well. This dynamic can be clearly seen in the changes to the ranking of the top 10 companies in the semiconductor industry in 2023.

• Intel has regained first place from Samsung after being number 2 for two years
• Nvidia's semiconductor sales in 2023 increased by 56.4%, catapulting the company into the top 5 for the first time. This is due to its leading position in the silicon market for artificial intelligence (AI). The company is in the right place at the right time.
• STMicroelectronics moved up three places to secure 8th place. STMicroelectronics' turnover rose by 7.7% in 2023, mainly due to its strong position in the automotive segment.

Very cloudy crystal ball for 2024

Market research and consulting firms base their forecasts primarily on the surveys they conduct with company management. The survey results are then enriched by the current and expected political environment of the players and analysts' empirical values.

However, the year 2024 will be strongly characterized by uncertainties - perhaps more so than normal. And uncertainties are poison for investments.

On the positive side, declining inflation could boost investment both in the industrial environment and among end consumers.

The existing uncertainties for 2024 have numerous causes. More than half of the world's population will be able to vote and the balance of political power will shift. Numerous conflicts (Ukraine, Gaza, various wars in Africa, etc.) and the global political actions of some states, such as Russia, China, North Korea and Iran, will not only cause restrictions in global trade.

In his 'Semiconductor Industry Market Forecast' published in January, Malcolm Penn recommends that all market participants carefully analyze available data. The time for popping champagne corks has not yet arrived.

www.gartner.com
www.futurehorizons.com

See our article 'Interview of the month: Malcom Penn, Future Horizons'.