In a recent development that spells positive news for the technology sector, the global semiconductor manufacturing industry appears to be on the brink of a significant recovery. This revival is evidenced by the latest data and forecasts from Semi, a leading industry body, which point towards an uptick in electronics and integrated circuit (IC) sales. This article delves into the details of Semi’s Semiconductor Manufacturing Monitor (SMM) report for the fourth quarter of 2023 (4Q2023) and its projections for the year 2024, shedding light on the anticipated growth and challenges in the sector.
Recovery in Electronics and IC Sales
The SMM report highlights a modest but noteworthy increase in electronics sales by 1% year-on-year (y-o-y) in 4Q2023. This increment marks the first annual growth since the latter half of 2022 and signals a turning point in the sector’s recovery trajectory. Furthermore, the report projects a more robust growth of 3% y-o-y in the first quarter of 2024 (1Q2024), reinforcing the optimism surrounding the industry’s outlook.
Parallelly, the IC segment witnessed a significant rebound, with sales surging by 10% y-o-y in 4Q2023. This growth is attributed to improved demand and the beginning of inventory normalization. The momentum is expected to carry forward, with a forecasted growth of 18% y-o-y in 1Q2024, underlining a strong recovery in the IC market.
Capital Expenditure and Fab Utilisation Rates
A vital aspect of the semiconductor manufacturing industry’s recovery is the anticipated mild improvement in capital expenditure (capex) and fab utilization rates. After experiencing considerable declines in the latter half of 2023, these metrics are expected to witness a recovery starting from 1Q2024. Specifically, memory capex is projected to increase by 9% quarter-on-quarter and 10% y-o-y, while non-memory capex is slated for a 16% rise during the quarter, albeit still below the levels seen in 1Q2023.
Fab utilization rates, which offer insight into the efficiency and capacity utilization of semiconductor fabrication plants, saw a modest increase from 66% in 4Q2023 to an anticipated 70% in 1Q2024. This improvement, although gradual, is a positive indicator of the industry’s health and its ability to meet growing demand.
Capacity and Equipment Billings
The report also touches upon fab capacity, which grew by 1.3% in 4Q2023, with similar growth expected in 1Q2024. This capacity expansion is crucial for accommodating the rising demand for semiconductors across various sectors. On the equipment billings front, 2023 saw figures surpassing initial projections. However, growth in this area is expected to be subdued in the first half of 2024, primarily due to seasonal factors.
Expert Insights
Clark Tseng, Semi’s senior director of market intelligence, expressed optimism about the recovery trajectory of the electronics and IC markets. He highlighted that despite the current low fab utilization rates, an improvement is anticipated as 2024 progresses. This sentiment is echoed by Boris Metodiev, TechInsights’ director of market analysis, who noted that semiconductor demand is firmly on the path to recovery. However, he also pointed out that the growth in the overall IC market this year might be tempered by slowing automotive and industrial markets, which could constrain the expansion of the analog segment.
The Role of AI and Geopolitical Factors
A significant takeaway from the insights provided is the potential role of Artificial Intelligence (AI) as a catalyst for the semiconductor industry. The proliferation of AI from cloud computing to edge devices is expected to drive demand for leading-edge semiconductors. Additionally, geopolitical dynamics are influencing the sector by creating excess capacity at the trailing edge, an aspect that could have long-term implications for the industry’s supply chain and competitiveness.
The global semiconductor manufacturing industry stands at a pivotal juncture, with signs of recovery becoming increasingly evident. The growth in electronics and IC sales, along with projected improvements in capex, fab utilization rates, and capacity, paints a promising picture for 2024. Challenges remain, particularly in the form of sector-specific slowdowns and geopolitical pressures. However, the potential of AI and the industry’s adaptability suggest a robust path forward. As the year unfolds, stakeholders across the technology ecosystem will be closely monitoring these developments, keen to capitalize on the opportunities that a recovering semiconductor manufacturing sector presents.
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