After a challenging year in 2023, where sales dropped by 9.4% to $520 billion, the chip industry is expected to experience a strong rebound in 2024, with a projected growth of 13% to reach $588 billion, according to a recent report by Deloitte.
The semiconductor industry is known for its cyclical nature, making predictions a difficult task. However, Deloitte’s global semiconductor industry outlook indicates an optimistic outlook for the industry in 2024, highlighting several factors contributing to this positive projection.
Factors Contributing to the Rebound
- Recovery in Memory Chip Market: Despite challenging conditions in 2023, the memory chip market, which is a significant driver for the industry, is expected to recover, reaching sales levels similar to those in 2022.
- Positive Stock Market Response: The stock market’s positive response is seen as a leading indicator of the industry’s recovery. The combined market capitalization of the top 10 global chip companies rose to $3.4 trillion by mid-December 2023.
- Resurgence of End Markets: End markets such as PCs and smartphones, which experienced declines in 2023, are expected to rebound with a 4% growth rate in 2024. This resurgence is crucial for the semiconductor industry, as communication and computer chip sales accounted for 56% of overall semiconductor sales in 2022.
Deloitte’s report also examines key measures of industry health, including inventories and fab utilization. While high inventories in fall 2023, exceeding $60 billion, present a significant headwind for sales in the first half of 2024, the report suggests an overall positive trend. However, the industry’s need for higher utilization, expected to fall below 70% in Q4 2023, may delay achieving profitability.
Pivotal Topics for the Semiconductor Industry in 2024
- Generative AI Accelerator Chips: Deloitte’s report predicts that generative AI-driven chips will contribute around 8.5% of total sales in 2024, with sales exceeding $50 billion. However, due to their relatively small unit volumes, the manufacturing capacity and industry utilization may be affected.
- Smart Manufacturing Trends: The report 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: Deloitte highlights the industry’s need for increased assembly and test capacity worldwide, considering it a critical aspect of future growth.
- IP Security and Cyberattacks: The report identifies semiconductor industry intellectual property (IP) as a new target for cyberattacks, posing a potential threat to the sector.
- Geopolitical Implications: Considering the geopolitical landscape, the report examines export controls on advanced node manufacturing equipment, technologies, and advanced generative AI semiconductors.
While Deloitte acknowledges the positive trajectory for the semiconductor industry in 2024, it emphasizes the need for strategic considerations amidst geopolitical challenges and potential threats to IP security.
