Semiconductor Monthly Edition 11
11/05/2023 by Carlos Romero
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As the 2022 – 2023 Financial year comes to a close, this month’s Semiconductor Monthly is all about growth, performance and what the future is predicted to hold for the next 12 months. We analyse the key growth indicators for the year ahead and take a look at India's ambitious plans to become a manufacturing hub.
Global semiconductor industry sales totalled $39.7 billion in February 2023, down by 4% compared to January’s total of $41.3 billion and 20.7% less than the February 2022 total of $50 billion.
Global semiconductor sales have continued to slow for the sixth consecutive month. The industry’s short-term market cyclicality is a result of ongoing macroeconomic changes; however, the market's medium-and-long-term prospects remain relatively solid. This is a result of the growing demand across multiple markets.
Slowing consumer markets are to blame for the decrease in global semiconductor sales. As a result, multiple manufacturers are unable to sell millions of chips, in particular DRAM and NAND flash. Successful inventory correction could be seen in Q3 and Q4 of 2023 as consumer markets begin to pick up again as predicted.
Experts estimate that the global semiconductor industry spending for front-end facilities equipment could recover by 2024. Semiconductor equipment spending reached a record-high of $98 billion this past year, a result of the high chip demand throughout the first half of the fiscal year of 2022.
2024 is projected to outperform and correct the downward trend in global revenue. The latest quarterly report by SEMI states global revenue will rise to $92 billion in 2023-2024, a staggering 21% increase YoY after the decline seen in 2022-2023. This recovery is due to the ongoing global expansion of fab capacity to support the expected growth across multiple industries.
SEMIs breakdown of the semiconductor industry provides insight into each market and the reasons for their growth. In the lead for fab equipment expenditure is Taiwan, the global leader in the semiconductor industry, with a 4.2% increase YoY. South Korea follows closely with a significant jump of 41.5% YoY spending. This jump is likely influenced by South Korean giant, Samsung Electronics, who is preparing to invest approximately $230 billion to build five new memory and foundry fabs on the outskirts of Seoul. This five-cluster semiconductor hub is expected to be completed by 2042.
North America has made domestic investments with the CHIPS and Science Act resulting in an increase of 23.9% YoY. Finally, Europe, the Middle East, Asia, and Japan will all invest heavily in each market sector to improve their domestic capabilities in semiconductor manufacturing.
You can read more about North American investments in our February 2023 Semiconductor Monthly here.
The Foundry segment is experiencing this growth thanks to the increasingly popular ChatGPT and GPT4, as well as other Artificial Intelligence (AI) chatbots and services. Nvidia has also recently announced its extensive inference platforms, preparing for further implementation of generative AI in organisations. We can expect AI, 5G, the Metaverse and other immersive media commodities to keep semiconductor chip demand afloat until the consumer market recovers in the latter part of this year (Q3 and Q4).
TSMC is planning a strategic move following the EU Semiconductor Act. Taiwanese media outlets report that several TSMC partners have recently been asked to submit their first quotations for equipment and factory facilities to be sent to Germany. According to reports, this is a similar strategy used when TSMC launched the Arizona plant construction project. This places TSMC and its potential Dresden plant construction in a mature stage. The final approval for this move will be confirmed on April 18th, following the monthly meeting of the European Parliament held in Strasbourg, France.
In a recent study, Lam Research Corporation investigated the potential implementation of Artificial Intelligence (AI) in the process development stage of chip fabrication. This stage is currently driven by human intervention and is a vital step for the mass production of advanced semiconductor chips worldwide. The semiconductor market is on an upward trend, with experts forecasting annual revenue to reach $1 trillion by the year 2030.
Lam Research Corporation's study, published in the prestigious scientific journal, Nature, highlights an opportunity to tackle two critical challenges facing the semiconductor industry:
The semiconductor industry has come a long way, with significant technological advancements over the years. As the industry continues to evolve, there is a constant need for increased efficiency and cost-effectiveness in the production of chips. The integration of AI in the process development phase of chip fabrication presents a promising solution to these challenges. We previously dove into AI implementation and how it can benefit the semiconductor industry, you can read our article here.
India is home to over 200 semiconductor design and embedded software companies, with one of the largest growing workforces on the planet. Despite their market share here, India’s manufacturing capacity is almost non-existent compared to the global leaders in this space.
The current talent gap that needs to be closed for India to gain a foothold in the manufacturing market is nothing short of enormous. An estimated 1.5 million skilled workers are needed in their domestic semiconductor market by 2027, a workforce that would more than double their existing semiconductor talent pool.
The new skilled workers would aid design and development of new products that improve manufacturing processes and ensure quality control, which would help companies to innovate and stay ahead of their competition. This development would be critical to several key sectors already aiding overall industry growth: electronics, automotive, AI/ML (Artificial Intelligence / Machine Learning) and telecommunications, to name a few.
The Indian semiconductor market was worth $23 billion in 2021 and is projected to reach $80 billion by 2028, growing at a CAGR (compound annual growth rate) of 17% in this forecast period. This growth can only happen if India creates an environment conducive of innovation and passes supportive policies and incentives to entice manufacturers to break ground in India.