Global Semiconductor Industry Outlook 2024

Let’s consider a world where a heart of technology beats seamlessly which is being orchestrated by the intricate dance of billions of transistors etched onto silicon wafers. The global semiconductor industry is undergoing a tectonic shift, and the ripples of this evolution are expected to be felt far and wide. The technological advancements in AI chipsets, data center GPUs, chiplet, and next-generation memories are not just shaping the future of electronics and connectivity but are also unlocking the unimaginable possibilities that touch every aspect of our lives.

The global semiconductor industry is evolving unprecedentedly, fuelled by proliferation of generative artificial intelligence (AI), Internet of Things (IoT), along with 5G and autonomous vehicles, resulting into increasing demand for advancement chipsets and integrated circuits (ICs), thus propelling the industry forward. AI alone is expected to drive significant growth, with its applications expanding across sectors like automotive, high-performance computing (HPC), data center, consumer electronics, healthcare, finance, and manufacturing.

MarketsandMarkets anticipates the global semiconductor market size to grow from USD 529 billion in 2023 to USD 617 billion by 2024, up 16.6% YoY. Semiconductor tech-giants are extensively focusing on developing data centric GPUs to support the Gen-AI use cases, thus turning it into an investment magnet.

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Industry Trends:

The semiconductor industry continues its robust growth trajectory, driven by factors such as rising demand for semiconductors in automotive, data centers, and high-performance computing (HPC) industries. Some of the other semiconductor industry trends are development in co-packaged optics (CPO), chiplets, and and high-bandwidth memory (HBM), increase in semiconductor content per vehicle, and governments worldwide promoting local manufacturing, eying opportunities from the shifting global semiconductor landscape.

In 2024, we observe the global silicon wafer market is poised for a rebound, propelled by a resurgence in demand to support applications such as HPC, AI, 5G, and automotive technology. Silicon wafer manufacturers are expected to adapt to supply chain challenges, contributing to the recovery and ensuring more stable silicon wafer availability. In 2024, we observe the semiconductor manufacturing equipment sales to see strong rebound majorly driven by the China’s silicon surge. Countries such as China, Taiwan, and South Korea are projected to uphold their positions as the top three destinations for equipment spending. China is expected to maintain its leadership fueled by a sustained surge in equipment billing.

Proliferation of Generative AI Fueling Demand for AI-chips

In 2024, the Gen-AI's extensive adoption is igniting a GPU firestorm. Earlier, the Gen-AI was confined to analyze data, however, in today’s scenario Gen-AI can now actively creates realistic text, images, and even code. This demands immense parallel processing power which a traditional CPUs can not handle. Due to specialized architecture and massive core count, the GPUs have become the unsung heroes, leading to skyrocketing demand. These specialized AI-chips are being in heightened demand from the cloud service providers (CSPs), to researchers and creative firms, further prompting manufacturers to scramble for production and innovation.

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Chiplet: Emerging New Wave of Moore’s Law

In 2024, as Moore's Law has led to its physical constraints, a transformative wave have emerged in the form of chiplets, breaking away from the traditional monolithic architecutre. These modular components, each designed for specific functions, revolutionize the landscape by reducing development costs, promoting superior performance, and increasing yield through interconnectivity. The chiplets have paved the way for heterogeneous integration, that allows optimal materials and processes for each unit, and supports overcoming the scaling bottlenecks. This unparalleled flexibility and scalability not only address core industry challenges but also drives growth in critical sectors such as autonomous vehicles, consumer electronics, and data centers. Intel Corporation (US), AMD (US), Apple Inc. (US), and Marvell (US) are at the forefront and are revolutionizing the chiplet landscape, thus solidifying the semiconductor industry's position for robust growth and transformative success in 2024 and beyond.

Opportunities:

The global semiconductor industry analysis presents significant growth opportunities across application areas including data centers, smartphones, PCs, consumer electronics, industrial, and automotive. The global semiconductor manufacturers are actively addressing the increased demand from these applications through several strategies such as advancing process technologies, diversifying product lines, research & development (R&D), streamlining supply chain, and increasing production capacity.

Next-generation Memory Technologies to Take Center Stage

In 2024, the next-generation memory technologies such as MRAM, ReRAM, HMC, and HBM, have taken the center stage due to extensive research and development efforts in past years. One of the major next-generation memory technology is High Bandwidth Memory (HBM). The HBM is a graphics DDR memory known for its high performance, capacity, low latency, and energy efficiency compared to traditional DRAM chips. Currently, the HBM market is dominated by three foremost storage industry giants: SAMSUNG (South Korea), SK Hynix Inc. (South Korea), and Micron Technology, Inc. (US). Since the inception of the initial silicon interposer HBM product in 2014, HBM technology has seamlessly evolved from HBM, HBM2, and HBM2E to HBM3 and HBM3e through iterative innovation.

With the growing demand for AI accelerator chipsets, manufacturers are emphasizing on launching newer solutions such as HBM3e during 2024, with expectations for HBM3 and HBM3e to become the market standard. The development timeline of HBM3e reveals significant progress, with Micron supplying its 8hi (24GB) samples to NVIDIA in July, SK Hynix in August, and Samsung in October 2024, respectively. With an emphasis on higher computational performance, the industry leaders have presented a road map to potentially launch HBM4 by in coming years presenting growth opportunities for the overall semiconductor memory market.

Process Nodes to Shrink Further

The semiconductor market is poised for a groundbreaking shift as enterprises are preparing to develop and commercialize sub-2nm process nodes in 2024. This will mark a remarkable leap in semiconductor miniaturization that will support increased energy efficiency, and heightened computational capabilities. In February 2024, Faraday Technology (Taiwan) reveals groundbreaking plans for a 64-core Arm Neoverse processor, set to be manufactured by Intel Corporation's contract division on the cutting-edge 18A (1.8nm) process. This SoC promises versatility, targeting data centers, edge systems, and advanced 5G networks. The demonstration of sub-2nm node sizes showcases the industry's commitment to push boundaries of innovation, positioning semiconductor technology at the forefront of the digital revolution, and setting the stage for transformative advancements.

Challenges:

In 2024, the semiconductor industry is going with a persistent talent shortage, and this challenge is anticipiated to remain a key issue in the foreseeable future. The complexity of semiconductor technologies requires a highly specialized workforce, and the talent shortage is again heightened due to lengthy training required for individuals to become proficient in the industry. Adding to this, layoffs have become a notable factor impacting the semiconductor industry. For instance, in December 2023, Intel Corporation (US) implemented an additional 235 permanent layoffs, supplementing the 549 reductions already executed at its Folsom office campus throughout the year in 2023. In October 2023, Qualcomm (US) cut 1,258 positions, equivalent to 2.5% of its workforce, in San Diego and Santa Clara, California offices in US.

Segment Nuances:

The forecast for 2024 signals a robust upturn in the global semiconductor market, with estimates suggesting a 16.6% surge, reaching a valuation of USD 617 billion. This substantial growth is anticipated to be primarily driven by the integrated circuit (IC) sector, which is poised to grow at a rate of over 19.0% from the preceding year. Most other key segments, such as Discrete, Sensors, and Optoelectronics, are also expected to register single-digit growth rates. Growth of the IC segment is majorly driven by the revenue performance of major players such as NVIDIA, Intel Corporation, and AMD during the second half of 2023. For instance, in November 2023, NVIDIA announced financial results for the third quarter of fiscal 2024, with record revenue of USD 18.12 billion, up 34% from Q2. The trend is expected to remain similar in 2024. Major semiconductor companies are expected to launch new technologies and products in 2024, creating additional demand for logic chips such as GPU, CPU, FPGA, and ASICs.

The Memory IC segment is expected to showcase an astonishing annual growth of 49.2% in 2024. The memory chips, including DRAM and NAND Flash, are expected to experience significant growth in 2024. Additionally, Chinese top-tier memory IC makers YMTC and CXMT are accelerating their production expansion, which brings new growth opportunities in the coming years.

North America continues to outpace other regions with YoY growth rates of 22.7% YoY in 2024. The growth is majorly driven by robust investment surge in the US semiconductor sector through the CHIPS and Science Act. The Asia Pacific region is expected to witness high market share in 2024 majorly due to ongoing investments and funding to support the deployment of new semiconductor foundries and Integrated Device Manufacturers (IDMs) facilities. China, Taiwan, and South Korea are expected to remain key destinations for semiconductor manufacturing equipment spending in 2024.