Semiconductor market correction could come in 2024 • The Register

The semiconductor world’s continuing roaring sales growth could hit a wall in 2024, an industry research firm has predicted.

IC Insights is projecting sustained semiconductor revenue growth in 2022 and 2023, with a market correction due the year after that.

“2024 is currently expected to be the next cyclical downturn in the market, and 2025-2026 will return to growth years,” Brian Matas, vice president of market research, told The Register.

The semiconductor sector is highly volatile, with up cycles in which chip demand outstrips the supply – as we’re seeing right now – followed by down cycles resulting in oversupply.

Companies adjust manufacturing to make more in-demand chips, but that ultimately results in flooding the market with more semiconductors than it needs. The factories tone down production or readjust capacity until the excess chip inventory is cleared, which then resets the market for another growth cycle.

The chip industry was caught off-guard during the pandemic with demand for chips skyrocketing; work-from-home drove demand for personal devices, and data centers were upgraded to handle cloud-based communication and collaboration platforms. That coincided with the electrification of cars, which boosted the demand for sensors and cheap chips like power management integrated circuits.

Cracks are already forming in the semiconductor sector, with the 28nm manufacturing node facing a possible oversupply situation next year as new factories come online.

IC Insights reckons semiconductor sales will reach a record $680.6bn in 2022, growing by 11 per cent from 2021. That’s a more realistic trajectory than the 25 per cent growth in 2020 compared to 2019.

The three-year rise from 2020 into 2022 will be the first double-digit growth streak for the sector since 1993 to 1995, IC Insights said. The 1990s’ streak was driven by PC shipments and electronics such as DVD players. The analyst house is projecting a compound growth rate of a more realistic 7.1 per cent through 2026, with 2024 being the down year.

IC Insights predicted a 12.3 per cent compound growth rate through 2026 for sensors and actuators used in cars, wireless equipment, wearables and other electronics. DRAM and storage integrated circuits, which are the largest by revenue size, will grow by 6.8 per cent.

“Cloud computing, artificial intelligence, machine learning, robotics, automotive electronics, industrial control and automation will be growth drivers even as mature markets like smartphones and personal computing platforms advance further,” Matas commented.

In the long term, demand for semiconductors is only going to go up, though managing the ups and downs along the way make judging demand and investment tricky. While prediction is an imperfect art, 2023/4 looks like being a rocky year for the industry. ®