Chip sales stop growing

Latest update time：2024-05-08

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Global chip market growth slowed in March as economic headwinds began to overwhelm a boost from artificial intelligence in chip pricing, according to the Semiconductor Industry Association.

The three-month moving average of the global chip market is US$45.91 billion, a decrease of 0.6% from February, but an increase of 15.2% from March 2023.

SIA reports data as a three-month moving average based on data collected by the World Semiconductor Trade Statistics Organization, which are proxies for Q1'24 and Q1'23. The decline in growth suggests that growth in 2024 may be more limited than previously forecast, but this is due to TSMC's negative metrics.

Global chip sales in the first quarter of 2024 totaled $137.7 billion, an increase of 15.2% from the first quarter of 2023, but a 5.7% decrease from the fourth quarter of 2023.

Most semiconductor market analysts still predict annual growth for the global chip market in 2024 of between 13% and 20%, but the latest data may indicate that double-digit percentage growth is unsustainable. The latest data shows that the consumer electronics business in North America and China continues to grow. However, contraction in Europe, Japan and weak growth in the rest of the world weighed on the overall market.

The Americas regional market (mainly the United States) grew 26.3% year-on-year, a significant improvement from 22.0% in February. China is the largest and fastest growing geographic market. China’s 3MMA transaction volume in March was US$14.14 billion.

"First-quarter global semiconductor sales were significantly higher than last year's first-quarter total, but sales declined sequentially and sequentially, reflecting normal seasonal trends," said John Neuffer, CEO of SIA in a statement. "The market is expected to continue growing during the remainder of the year, with double-digit annual growth expected in 2024," he added.

Don’t overreact to a 25% drop

The latest data from European Component Distribution (DMASS) shows first-quarter revenue fell 23.3%, with the semiconductor business down 26.5%.

DMASS Europe Chairman Hermann Reiter strongly emphasized that there was no reason to panic and said that such market consolidation was long overdue. “Everyone should prepare for a few quarters of soft bookings and billings,” he said, adding, “There’s no point in overreacting with cost-cutting now because there’s a huge recovery in all industry segments potential, and technology. Electronic components will remain a key technology for innovation and transformation for many years to come.”

DMASS said that after three years of "significant growth", all components fell by more than 23% in the first quarter of 2024, signaling "several challenging quarters". Members reported that consolidated distribution revenue fell 23.3% to €4.58 billion, with semiconductors down 26.5% to €3.0 billion and IP&E (interconnect, passive and electromechanical) components down 16.3% to €1.57 billion.

The UK proved to be the most resilient country in the semiconductor industry, with a decline of only 15%, followed by Italy (down 19.88%), Germany (down 30.26%), Benelux (down 35.86%), Switzerland, Northern Europe and Austria. The first quarter saw the largest declines, 35.49%, 32.27% and -40.20% respectively.

Reiter is optimistic, describing the first quarter of 2024 as "the least surprising quarter I've seen in a while. Even though we may face some challenges in the next few quarters, the recovery will start sooner or later, and I believe that in 2025 will get back on track.” “There is no point in overreacting now with cost-cutting initiatives. The multiple crises the world is currently facing should obscure a simple fact: the electronics revolution is underway: from an all-electric society to artificial intelligence, the world needs it. With more and more innovative components, we will find more opportunities than resources to achieve these goals.”

Among all countries, only high-power LEDs and microprocessors showed growth, discrete semiconductors fell by 30%, power semiconductors fell by 20.55%, sensors and actuators fell by 31.29%), optoelectronics fell by 18.06%), analog fell by 31.09%), and memory down 19.88%), MOS micrologic down 23.32%), programmable logic down 36.65%) standard logic down 31.60%).

IPE also fell by 16.3% to 1.57 billion euros in the first quarter, with passive components taking the biggest hit, falling by 21.18%, followed by electromechanical (-13.10%) and power supplies (-13.36%). DMASS also reported that Central Europe (Germany, Austria and Switzerland) were the worst affected (down 23.24%, 27.89% and 20.57% respectively), with "surprising" declines in the UK, France, Italy and the Iberian Peninsula. The amplitudes are 12.49%, 12.82%, 11.23% and 10.15% respectively.

Chairman Hermann Reiter concludes: “It is becoming increasingly clear that the component market is much more complex than you see in global market forecasts. For example, the hype about artificial intelligence is not everywhere and only concerns a few component types. ".

Global chip materials market decline:

China is the only country growing

In 2023, global semiconductor materials market revenue fell by 8.2%, totaling US$66.7 billion, down from US$72.7 billion in the previous year. Income fell in all regions of the world except mainland China, which posted at least some growth. SEMI, the global electronics manufacturing and design supply chain industry association, reported this downward trend.

Revenues fell across different segments of the market. Wafer fabrication materials revenue fell 7.0% to $41.5 billion. The most significant declines in this area were silicon, resist assist materials, wet chemicals and chemical mechanical planarization (CMP). Meanwhile, packaging materials used to build chip enclosures reported an even steeper decline of 10.1%, with revenue falling to $25.2 billion, primarily due to declines in the organic substrate industry.

The shrinking market size has been attributed to weaker demand for semiconductors as manufacturers tried to minimize excess inventory last year. This inventory management results in underutilization of manufacturing facilities, directly affecting the consumption of semiconductor materials. Reduced operating rates at these facilities are a key factor in the reduction in material usage.

From a geographical perspective, Taiwan, China, has become the largest consumer of semiconductor materials for the 14th consecutive year, with revenue contribution reaching US$19.2 billion. That's not particularly surprising, since Taiwan's TSMC makes chips for the world, including tech giants Apple, AMD, Intel and Nvidia.

After Taiwan, China, mainland China maintained its second place with consumption growth and revenue of US$13.1 billion. Considering that China leads the world in building new fabs, it is logical that Chinese companies buy more semiconductor materials than other countries.

South Korea ranked third with $10.6 billion, which is not surprising since companies such as Samsung and SK Hynix produce most of their 3D NAND and DRAM storage devices domestically.

Apart from these countries, most other regions have seen significant declines in semiconductor material consumption. Most notably, the North American chip materials market shrank by 11.4% last year to $5.561 billion, which is not surprising as the United States continued to lose chip manufacturing market share last year. The only smaller market is Europe, with a market size of US$4.319 billion in 2023, a year-on-year decrease of 5.7%.

Artificial intelligence craze,

Masking the slow recovery of semiconductors

Artificial intelligence chips are selling like hot cakes, but others are not so popular.

Typically, when TSMC forecasts growth of 21-26% this year and Samsung's operating results soar, the entire semiconductor industry can look forward to a solid year. But the recovery has proven uneven and slower than expected, with the industry not even looking certain of achieving double-digit growth in 2024.

The contrast between Taiwan’s industry leaders and the entire industry largely stems from one application: AI. TSMC CEO CC Wei told investors on a first-quarter earnings call that cloud service providers and forward-looking companies embracing generative artificial intelligence are generating "extremely high" demand for high-end chips. GPUs used for AI training also require large amounts of memory, helping memory makers escape lengthy downward cycles (although Samsung lags behind SK Hynix in this area).

In the consumer sector, things are not so rosy. Wei said the recovery of the smartphone terminal market is "gradual" but "not sharp" and that the PC market has hit bottom but is recovering "slowly". Momentum has yet to pick up in automotive, industrial and mature semiconductors. According to Semi, fab utilization averaged about 70% in the fourth quarter of 2023, the latest period for which data is available.

Wei said that overall, the global tech industry is not recovering fast enough. In a note to investors, Susquehanna analyst Christopher Rolland agreed that despite strength in certain segments, the industry faces "broad-based" headwinds. S&P Global Market Intelligence noted that the semiconductor industry's "near-term outlook is bleak."

In the typical semiconductor downturn-to-upturn, memory found its way out of the woods first. This is what we are seeing now. But as AI boosts revenue, it's difficult to tell how much of this recovery is due to improving industry fundamentals. Given the macroeconomic and geopolitical uncertainties, the economic recovery in the second half of the year - as predicted by ASML, ASM and others - seems uncertain. It may take longer.

That said, first-quarter results from another industry leader are promising. Texas Instruments (TI), whose products are widely used in a variety of end products (but not much in artificial intelligence systems), raised its second-quarter forecast to boost confidence that demand will rebound across the board. It's worth noting, however, that TI management is concerned that early signs of industry confidence may prove to be false indicators and has declined to provide guidance beyond the second quarter.

Reference link

https://www.eenewseurope.com/en/global-chip-market-growth-halted-in-1q24/

https://www.electronicsweekly.com/news/dmass-warns-against-over-reaction-to-25-decline-2024-05/

https://www.tomshardware.com/tech-industry/global-chips-materials-market-declined-in-2023

https://bits-chips.nl/artikel/the-ai-frenzy-hides-a-sluggish-semiconductor-recovery/

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