After 2023 fall, global semiconductor market poised for 11.8% growth next year

Semiconductors are materials that have electrical conductivity between a conductor and an insulator. They are used to create electronic devices like transistors, diodes and integrated circuits (ICs). These electronic components are the building blocks of modern electronics and are essential in everything from computers and smartphones to medical equipment.

The semiconductor industry is also crucial for national security. Semiconductors are used in military equipment and other critical infrastructure, making their availability crucial for national security.

Into the future, semiconductors will be used to create sensors, microcontrollers and other electronic components that make IoT possible.

Another significant technological advancement that is set to drive demand for semiconductors is artificial intelligence (AI), which already finds application in a variety of industries, from healthcare and finance to transportation. AI requires significant processing power, which is only possible because of the semiconductor industry. As AI continues to advance by leaps and bounds, the demand for semiconductors will increase correspondingly.

Advances in semiconductor technology are driving the development of renewable energy technologies such as solar power, wind power and energy storage systems.

To produce a semiconductor device, manufacturers must heat, cut, grind and polish a semiconductor “ingot” into a wafer-thin form. Next, the wafer goes through a process called photoresistor masking. This applies highly complex circuits to the wafer and can take months to complete. Subsequently, the wafer is subject to a process of chemical etching, which diffuses areas that are not covered by photoresistor film. Lastly, the wafer undergoes “doping.” This adds boron or phosphorus to the semiconductor to alter its conductivity. These steps have to be repeated till the completion of multiple layers.

Semiconductor manufacturing depends on substances known as rare earth metals. These materials play an integral role in manufacture of most electronic devices.

Incidentally, China has nearly monopolized production of these metals. Meanwhile, because of the US-China trade disputes, prices for these metals have risen.

Semiconductors create economic tension because they represent a multibillion-dollar industry. While the US has historically maintained leadership in the semiconductor industry, competition is quite forceful from other countries.

According to the Semiconductor Industry Association (SIA), the United States enjoys nearly 46 per cent of global sales of semiconductors. The top five semiconductor industry leaders, in order of their market share are Intel Corporation ($241.88 billion); Samsung Corporation ($221.6 billion); NVIDIA Corporation ($152.88 billion); Texas Instruments Incorporated ($113.83 billion) and Broadcom Inc. ($108.13 billion)

Of them, barring Samsung, which is headquartered in South Korea, all others are based in the United States. While currently the US maintains its industry dominance, experts opine that China will be the next large competitor. Semiconductor sales and marketing teams should prepare accordingly to checkmate the fast-emerging contender.

A growing trend of mega-corporations such as Google and Apple to develop their own proprietary semiconductor devices in-house is leaving some industry experts concerned. This newfound independence on the part of major tech companies is still in its fledgling stage. At the same time, smaller semiconductor-manufacturing companies could find growing markets in the fields of IoT and AI, which often require niche solutions for their products.

Although, the semiconductor industry may take a dip this year, a rebound is expected in 2024. The global semiconductor market is expected to see a double-digit downfall in 2023, according to World Semiconductor Trade Statistics. But 2024 looks bright with the industry body forecasting an estimated 11.8% growth for the year. Global sales of total semiconductor manufacturing equipment by original equipment manufacturers next year are forecast to bounce back from a projected contraction of 18.6% to $87.4 billion in 2023 following the industry record of $107.4 billion in 2022. This is as per SEMI’s mid-year total semiconductor equipment forecast – OEM Perspective at SEMICON West 2023. The expected 2024 recovery – to $100 billion – will be driven by both front-end and back-end segments.

Sales of wafer fab equipment, which includes wafer processing, fab facilities and mask/reticle equipment, are projected to decrease 18.8% to $76.4 billion in 2023 – more than the 16.8% decline predicted by SEMI in the 2022 year-end forecast. The wafer fab equipment segment is projected to account for the bulk of the recovery to $100 billion in 2024, generating $87.8 billion in sales, a 14.8% increase.