SI: Semi Market Experiences Solid Turnaround

The global semiconductor market is now solidly in a turnaround, according to Semiconductor Intelligence. WSTS has revised its data for 2Q 2023 growth over 1Q 2023 to 6.0% from 4.2% previously, and 3Q 2023 was up 6.3% from 2Q 2023. Semiconductor Intelligence forecasts 3% sequential growth in 4Q 2023 and year-to-year growth in 4Q 2023 of 6%. This positive trend sets the stage for double-digit year-on-year growth for each quarter of 2024.

The top 15 semiconductor companies all reported revenue growth in 3Q23 compared to 2Q23. The growth ranged from less than one percent at Texas Instruments and Analog Devices to double-digit growth at Nvidia, Samsung, SK Hynix, and Media Tek. Nvidia, in particular, has surpassed Intel to become the largest semiconductor company, as reported in our September newsletter. However, the official 3Q23 results for Nvidia will only be available after it reports earnings next week.

The outlook for 4Q23 revenue change is mixed. Of the ten companies providing guidance, five expect revenue to increase from 3Q23, while the other five expect revenue to decline. The companies expecting growth are driven by recoveries in PCs and smartphones, while the companies expecting revenue declines are heavily tied to the automotive industry.

Companies such as TI, Infineon, STMicroelectronics, NXP, and Renesas have generally fared better in 2023 than the memory companies and companies more dependent on PCs and smartphones. These companies are not pointing to a decline in automotive business in 4Q23 but are citing other factors. TI foresees a weak general environment, Infineon stated that the auto sector would be up in 4Q23 but other segments are sluggish, ST pointed to weakness in the industrial sector, NXP blamed the communications infrastructure segment, and Renesas cited inventory adjustments.

The United Auto Workers (UAW) union went on strike against the big three U.S. automakers – General Motors, Ford, and Stellantis – from mid-September until the end of October. The strike led to a 10% decline in U.S. production of motor vehicles and parts in October. Although the above-mentioned companies did not comment on the strike in their earnings reports or conference calls, Renesas stated that it expected the strike to have some impact on revenue in either 4Q23 or in 2024.

Looking ahead to 2024, two key drivers of the semiconductor market are expected to recover. IDC forecasts a 4% increase in smartphone units in 2024 after a 5% decline in 2023, and projects a 4% growth in PC units in 2024 following a steep 14% drop in 2023. In contrast, production of light vehicles is expected to moderate to 3.7% growth in 2024 from 4.7% in 2023, according to Statista.

Semiconductor Intelligence expects the strongest revenue growth in 2024 to come from the memory companies (Samsung, SK Hynix, and Micron), the PC and computing focused companies (Nvidia, Intel, and AMD), and the smartphone focused companies (Qualcomm and MediaTek). On the other hand, the companies primarily focused on automotive, industrial, and IoT (TI, Infineon, ST, NXP, and Analog Devices) are projected to show relatively less revenue growth.

Forecasts for the year 2023 semiconductor market change are homing in on the range of minus 9% to minus 12%. Semiconductor Intelligence projects a decline of 9.5%. However, the momentum heading into 2024 is clear, with forecasts ranging from a healthy 9% growth from Future Horizons to a strong 20% growth from IDC. Semiconductor Intelligence's projection falls in the middle at 16% growth. A major factor that will determine whether 2024 will be closer to 9% or 20% growth is the degree of price increases in memory.

The semiconductor market recovery is solidly underway. Despite the bright outlook, many companies remain cautious as the global economy is still recovering from the COVID-19 pandemic and its aftereffects. Political tensions are high, particularly between the two largest economies – the U.S. and China – and wars are continuing in Ukraine and Israel/Gaza. However, Semiconductor Intelligence believes that the industry is poised for a healthy semiconductor market in 2024 and beyond.