Future Horizons Predicts 16% Semi Growth by 2024

The semiconductor industry is set to experience significant growth in the coming years, according to the Future Horizons semiconductor forecast for 2024. CEO Malcolm Penn predicts a 16% increase in the industry, breaking the $600 billion barrier. This positive outlook brings hope to the market, but it is important to consider the potential challenges that lie ahead.

One encouraging sign is that the industry's downtown bottomed out in the first quarter, one quarter earlier than the usual four-quarter cycle. This unexpected development was followed by an ultra-strong second quarter, which took many by surprise. However, despite these positive indicators, there are still concerns about the overall health of the market.

Discretes, a key component of the semiconductor industry, are still experiencing negative growth. The market figures are only up because average selling prices (ASPs) have recovered. This indicates that the industry has not yet entered a super-cycle. Additionally, IC unit growth has yet to turn around, with bread and butter products still struggling. Future Horizons predicts that it will take another 2 to 3 quarters before balance is restored.

ASPs have seen a significant increase, currently standing at 16% above the pre-recession level of $1.35 and 42% above the low recorded in January 2023. However, it is important to note that the $400 billion IC market is not solely dominated by high-priced Nvidia GPUs. This highlights the need for a diverse range of products to sustain growth in the industry.

One concerning trend is the excessive capital expenditure (capex) in the industry. In the first quarter, capex reached its highest level ever recorded as a percentage of IC sales. This surge is largely driven by China, which has been aggressively investing in the semiconductor market. However, if we exclude China from the figures, the situation appears more favorable. Non-China capex was reduced in the second quarter and is expected to continue declining throughout 2024.

CEO Malcolm Penn raises a red flag regarding China's buying behavior, describing it as predatory. China's increased purchasing activity, which has grown by 30% since 2022 and 400% since 2012, poses a serious threat to the industry. They are particularly focused on mature nodes and are buying anything they can get their hands on. This raises concerns about potential over-supply and the need for careful management of inventory.

If an over-supply situation were to occur, it could worsen trade tensions, lead to protectionism, and severely disrupt the semiconductor industry. It is crucial for industry players to closely monitor these developments and take appropriate measures to ensure a stable and sustainable future.