After a weak year where sales fell 9.4% to $520 billion in 2023, the chip industry could see a strong rebound with 13% growth to $588 billion in 2024, Deloitte predicted.
The semiconductor industry is known for its cyclical nature, but making predictions is always tough. Deloitte said in its new global semiconductor industry outlook that the industry is poised for a comeback in 2024.
The consulting firm highlights several factors contributing to this optimistic outlook. Despite challenging conditions in 2023, the memory chip market, a major driver, is expected to recover, with sales reaching 2022 levels. The stock market’s positive response is seen as a leading indicator, with the combined market capitalization of the top 10 global chip companies rising to $3.4 trillion by mid-December 2023.
End markets such as PCs and smartphones, which experienced declines in 2023, are expected to rebound with 4% growth in 2024. This resurgence is crucial for the semiconductor industry, given that communication and computer chip sales represented 56% of overall semiconductor sales in 2022.
Deloitte’s report delves into key measures of industry health, including inventories and fab utilization. There were high inventories this fall in excess of $60 billion, and that’s a significant headwind for sales in the first half of 2024. But the report suggests an overall positive trend.
However, the industry’s need for higher utilization, expected to fall below 70% in Q4 2023, may mean it will take time to achieve profitability.
Five pivotal points
The executive summary outlines five pivotal topics for the semiconductor industry in 2024:
Generative AI accelerator chips: The report anticipates that generative AI-driven chips, with predicted sales exceeding $50 billion in 2024, will contribute around 8.5% of total sales. However, the relatively small unit volumes of these high-value chips may impact overall manufacturing capacity and industry utilization.
Smart manufacturing trends: Deloitte explores trends in smart manufacturing and the industry’s adoption of generative AI, shedding light on the evolving landscape of semiconductor production.
Global assembly and test capacity: The report emphasizes the industry’s need for more assembly and test capacity worldwide, considering it a critical aspect of future growth.
IP security and cyberattacks: Semiconductor industry intellectual property (IP) is identified as a new target for cyberattacks, posing a potential threat to the sector.
Geopolitical implications: The report examines export controls on advanced node manufacturing equipment, technologies, and advanced generative AI semiconductors, considering the geopolitical landscape.
While Deloitte acknowledges the positive trajectory for the semiconductor industry in 2024, it also emphasizes the need for strategic considerations amidst geopolitical challenges and potential threats to IP security.
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