Image Credits - EPA
The global chip industry is gearing up for a significant resurgence following a challenging year in 2023, according to forecasts from the Semiconductor Industry Association (SIA). Despite a decline of 8.2 per cent in worldwide sales to $526.8 billion last year, the industry is expected to experience a robust recovery in 2024, with sales projected to soar to nearly $600 billion.
John Neuffer, President and CEO of the SIA, highlighted the industry’s rebound during the latter half of 2023, attributing it to increasing momentum that is anticipated to continue this year. Neuffer emphasized the pivotal role of semiconductor chips in various products, indicating a promising long-term outlook for the market.
Nvidia Corp emerges as a key player driving the industry’s growth, particularly with its market-leading artificial intelligence (AI) accelerators. These chips, in high demand due to their capability to handle substantial data volumes necessary for AI model development, have positioned Nvidia favourably amidst the downturn.
Nvidia’s remarkable performance is evident in its projected sales, expected to more than double to almost $60 billion in the fiscal year ending last month. Analysts anticipate further growth, forecasting the company’s annual revenue to surpass $90 billion by January 2025.
Investors are optimistic about the prospects of chipmakers like Nvidia, anticipating benefits from the surge in AI-related hardware spending. The Philadelphia Stock Exchange Semiconductor Index, which surged 65 per cent in the previous year, continues to exhibit positive trends, up 3.9 per cent this year as of Friday’s close.
Despite overall optimism, several industry giants encountered significant challenges in 2023, witnessing steep declines in sales as customers reduced orders while addressing excess inventory. However, companies like Intel Corp and Qualcomm Inc express optimism, suggesting that markets are returning to normal buying patterns, marking the end of severe contractions.
Neuffer attributes the sluggish start of 2023 to a “hangover” from the pandemic, where electronics manufacturers grappled with supply shortages amidst surging demand. This led to over-ordering by customers, resulting in an inventory glut as demand for devices like personal computers slowed with the normalization of the economy.
Regionally, Europe emerged as the only area with sales growth in 2023, registering a 4 per cent increase. Conversely, China and the Asia Pacific region witnessed the steepest declines, with China’s revenue, the largest segment of the industry, plummeting by 14 per cent. The Americas experienced a market contraction of 5.2 per cent.
The anticipated rebound in the global chip industry signifies resilience and adaptability amidst challenges, driven by technological advancements and evolving consumer needs.