The semiconductor sector anticipates a rebound and growth by 2024 following a phase of declining sales. The rise is primarily attributed to chips crafted for AI applications.
During the COVID-19 crisis, supply chain disruptions coupled with a sluggish global economy reduced the demand for electronic products.
World Semiconductor Trade Statistics (WSTS) projects a 10% drop in industry sales for 2023, amounting to USD 515.1bn. Nevertheless, a surge of roughly 12% to almost USD 576bn is anticipated in 2024.
Sales of AI-specific chips remain robust, with even further growth anticipated. Gartner projects a 21% growth this year for these components, with a steeper increase of 25.6% in 2024. By 2027, the AI chip market is forecasted to soar from its current USD 53.5bn to USD 119.4bn.
At the forefront of this surge is Nvidia, a semiconductor firm closely linked with AI innovations. Nvidia chips, for instance, power AI software like ChatGPT.
The AI surge allowed Nvidia to double its last quarter’s revenue to USD 13.5bn, with profits jumping from USD 656m to nearly USD 6.2bn.
This impressive growth also reflected on the stock market, with Nvidia shares surging 232% on the Nasdaq this year.
Jensen Huang, Nvidia’s CEO, envisions a computing transformation, with a major shift in data centers towards Nvidia’s chip architectures.
He emphasized the overwhelming demand they are facing. Given Nvidia’s expertise in AI, they are leading the industry. Their historical focus on graphics processors (GPUs) gives them an edge for AI applications, particularly intense AI training, compared to traditional CPUs.
While Nvidia thrives, other semiconductor giants reveal mixed results. Intel, for instance, bounced back to profitability last quarter with a profit of USD 1.48bn, even as sales dipped by 15%.
TSMC reported its first profit dip in four years, but not as pronounced as expected. Qualcomm, affected by a decrease in global smartphone sales, reported a 23% decline in revenue to roughly USD 8.5bn this quarter.
However, there’s hope for industry recovery this year, propelled by cloud computing growth, renewable energy demands, and the shift to electric mobility.
Apart from the giants, startups are also lured by Nvidia’s success. European manufacturers, like STMicroelectronics, have seen growth due to their specialization, especially from the automotive sector.
ARM’s upcoming IPO, backed by Softbank, is projected to invigorate the sector. Major tech firms, including Apple and Nvidia, reportedly plan strategic investments in the IPO, ranging between USD 25m and USD 100m.
Yet, the industry faces uncertainty from China’s strained ties with some Western nations. Current and potential U.S. restrictions on semiconductor exports and machinery could hinder growth, potentially spurring retaliatory actions. China’s slowing economy, impacting PC and consumer electronics demand, also looms as a concern.
