Semiconductor Industry Rebounds as AI Fuels Record Sales

Share
Research has found the global semiconductor manufacturing industry is showing signs of recovery and growth
Global semiconductor manufacturing shows signs of recovery with 27% YoY growth in IC sales, driven by surging demand for AI chips and high bandwidth memory

The semiconductor industry has weathered a tumultuous period marked by significant challenges and unprecedented demand. In recent years, the sector has been made to grapple with severe supply chain disruptions, exacerbated by the global pandemic, geopolitical tensions and natural disasters. These issues led to widespread chip shortages, affecting industries from automotive to consumer electronics.

Simultaneously, the rapid advancement of artificial intelligence (AI) and high-performance computing (HPC) has fuelled an insatiable appetite for cutting-edge semiconductors. This surge in demand, particularly for advanced nodes and specialised chips, has placed immense pressure on manufacturers to expand capacity and accelerate innovation.

The industry has also faced increasing geopolitical complexities, with nations vying for technological supremacy and implementing policies aimed at reshoring semiconductor production. These multifaceted challenges have forced the semiconductor sector to adapt swiftly, driving investments in new fabs, alternative supply chains, and advanced manufacturing technologies.

Now, the global semiconductor manufacturing industry is showing signs of recovery and growth, according to the latest Semiconductor Manufacturing Monitor (SMM) Report released by SEMI. The report, which covers the second quarter of 2024, highlights significant improvements in integrated circuit (IC) sales, stabilising capital expenditure and increased installed wafer fab capacity.

The global semiconductor industry: Challenges and opportunities

The semiconductor industry is dominated by a handful of key players. Companies like Taiwan Semiconductor Manufacturing Company (TSMC), Samsung and Intel are leading the charge in manufacturing the minuscule chips that power everything from smartphones to supercomputers, with TSMC in particular solidifying its position as the world's largest contract chipmaker. Other significant companies contributing to the semiconductor ecosystem include NVIDIA, Qualcomm and Broadcom, which design the chips, and equipment suppliers like Applied Materials and ASML, essential for the complex manufacturing process.

The industry’s resurgence comes amidst a complex landscape of challenges and opportunities. While slower recovery in some end markets has tempered growth in the first half of the year, the burgeoning demand for artificial intelligence (AI) chips and high bandwidth memory (HBM) has provided a strong impetus for expansion.

Youtube Placeholder

Clark Tseng, Senior Director of Market Intelligence at SEMI, notes the shifting trends in semiconductor capital expenditures: “Despite moderate semiconductor capital expenditures in the first half of the year, we expect a positive trend to begin in Q3 2024 led by memory CapEx. Strong demand for AI chips and high bandwidth memory is boosting results in various segments of the semiconductor manufacturing ecosystem.”

This optimism is reflected in the report's findings, which show that IC sales experienced a robust 27% year-over-year growth in Q2 2024, with projections indicating a further surge of 29% in Q3 2024. These figures are poised to surpass the record levels seen in 2021, primarily driven by the AI-fuelled demand.

Key facts
  • IC sales projected to surge 29% in Q3 2024
  • Installed wafer fab capacity reached 40.5 million wafers per quarter in Q2 2024
  • Memory CapEx expected to grow 16% quarter-on-quarter in Q3 2024
  • Electronics sales forecast to grow 4% YoY and 9% QoQ in Q3 2024

The installed wafer fab capacity has also seen an uptick, reaching 40.5 million wafers per quarter (in 300mm wafer equivalent) in Q2 2024. This figure is expected to rise by 1.6% in Q3 2024. Notably, foundry and logic-related capacity demonstrated stronger growth at 2.0% in Q2 2024, with a projected increase of 1.9% in Q3 2024. This growth is attributed to the capacity build-up for advanced nodes, highlighting the industry's push towards more sophisticated manufacturing processes.

Memory capacity, while showing more modest growth at 0.7% in Q2 2024, is forecast to see a 1.1% increase in Q3 2024. This growth is supported by the strong demand for HBM and improving memory pricing conditions, underscoring the critical role of memory in the current technological landscape.

Interestingly, all regions tracked in the report saw increases in installed capacity during Q2 2024. China remains the fastest-growing region, despite mediocre fab utilisation rates. This continued expansion in China reflects the country's strategic focus on bolstering its domestic semiconductor industry, even in the face of global challenges and trade tensions.

The improving demand has had a positive impact on inventory levels, with IC inventories declining by 2.6% year-over-year in the first half of 2024. This reduction in inventory suggests a healthier balance between supply and demand in the semiconductor market.

Capital expenditure in the semiconductor industry, while conservative in the first half of 2024 with a 9.8% year-over-year decrease, is expected to turn positive starting in Q3 2024. This shift is driven by the growing demand for AI chips and the rapid adoption of HBM. Memory CapEx is projected to lead this growth at 16% quarter-on-quarter, while non-memory related capital expenditures are expected to increase by 6% quarter-on-quarter.

“The entire semiconductor supply chain is recovering this year as the market prepares for a surge in 2025,” comments Boris Metodiev, Director of Market Analysis at TechInsights, which produced the report in partnership with SEMI. “AI is certainly continuing to drive high value ICs to the market, while also supporting CapEx for capacity expansion of AI chips and especially HBM. As consumer demand recovers, and new technologies like AI are pushed to the edge, unit volumes and especially revenues will recover and support the broader semiconductor manufacturing sector.”

******

Make sure you check out the latest edition of Technology Magazine and also sign up to our global conference series - Tech & AI LIVE 2024

******

Technology Magazine is a BizClik brand

Share

Featured Articles

SAP and AWS Partner on AI-Powered Cloud ERP Platform GROW

Partnership between enterprise software firm SAP and cloud computing leader Amazon Web Services aims to speed cloud software adoption with generative AI

SAVE THE DATE – Cyber LIVE London 2025

Cyber LIVE returns in 2025 for a one-day in-person event co-located with Tech & AI LIVE London Global Summit

Amazon's New AI Chip Challenges Nvidia's Dominance

Amazon's launch of Trainium2 is poised to disrupt the AI chip market and aims to challenge Nvidia's AI hardware leadership

Wipro Cloud Deal Marks Marelli’s Data Centre Transformation

Digital Transformation

SUBMISSIONS OPEN - Global Tech & AI Awards 2025

Digital Transformation

How Snowflake Aims to Tackle Global Data Inequality

Data & Data Analytics