The year 2022 proved to be a challenging year for the semiconductor industry despite enormous investment and support from the corporate and public sectors, as well as extraordinary amounts of coverage from the international media. This was due to the spillover effects of chip shortages on the general public. Geopolitical tensions between the U.S. and China and supply chains were severely hampered.
But what can we expect in 2023?
Last year, the global semiconductor industry underwent major cuts as a strategic response to address inventory buildup and excess following a nearly two-year period of boom in semiconductor trends.
Low consumer electronics demand, high inflation, and rising interest rates also impacted the industry, which resulted in a slower growth rate for the semiconductor sector in 2022 compared to 2021 (approximately 7% vs. 26.3%).
However, this is not the end of semiconductors. In this blog, we have discussed the top semiconductor trends to keep an eye out for. Let’s get started!
Semiconductor Industry Outlook: Will it Step Ahead with a Steady Foot?
Every year, one of the initial tasks is to create sales forecasts. Analysts and business professionals were already crafting their predictions for 2023 well before the previous year came to a close. Most analysts forecast that the worldwide semiconductor market will experience a 4% dip in revenue in 2023, with memory being the most affected. The whole consumer electronics business is slowing down due to the declining state of the world economy, making an oversupply all but inevitable.
While hundreds of billions of dollars were spent in 2022 to expand manufacturing capabilities, the demand for gadgets like laptops and smartphones seems to be dropping. Some people think that since consumers have more freedom following lockdowns, they are simply spending their hard-earned money on other things like travel and recreation. Unless the state of the world economy substantially improves and interest and inflation rates decline, this trend is likely to amplify over the course of the upcoming year.
What are the Current Trends in the Semiconductor Industry?
Given below are the top three semiconductor trends to look out for:
1. Automotive Industry
The auto sector is projected to witness a boom due to the continued growth of the EV market and the success of R&D in autonomous vehicles. The growth and expansion of the automotive market will be influenced by the strength and capability of semiconductors integrated into the vehicles.
Advanced semiconductor materials, semiconductor design trends, and semiconductor manufacturing trends are crucial when developing, testing, and producing 21st century cars with modern technology and the expertise of skilled workers. These semiconductor trends are expected to surpass the domestic market and enter the transportation and freight sectors, potentially compounding over time. However, it remains uncertain whether this expansion will sufficiently compensate for the decline in the consumer electronics market.
In June 2023, the Semiconductor Industry Association (SIA) reported $40.0 billion in sales of semiconductors globally, indicating a 0.3% increase compared to March 2023’s total of $39.8 billion. In April 2022, semiconductor sales experienced a notable drop of 21.6%, falling from the previous month’s total of $50.9 billion.
Based on recent projections by WSTS (World Semiconductor Trade Statistics), global sales are expected to decline by 10.3% in 2023 but are predicted to bounce back with an 11.9% increase in the subsequent year. SIA accounts for approximately two-thirds of non-U.S. chip companies’ revenue and represents 99% of the semiconductor sector in the United States.
While the statistics point in one direction, notable personalities in the industry say otherwise. For instance, Richard Gordon, VP of Gartner for semiconductors and electronics says that the semiconductor sector should be careful “not to get into a doom spiral”. He further stated that the market will recover.
2. Automotive Chips
Another key semiconductor trend to closely monitor is the growing prevalence of automotive chips. According to McKinsey, this semiconductor industry trend would increase at a rapid CAGR of 13% from USD 42 billion in 2021 to USD 125 billion in 2030. As a result of the need for superior computational power for cutting-edge features like self-driving, ADAS, and real-time road monitoring, the market for automotive chips with advanced processes is expected to develop at a CAGR of 24% over the next ten years.
Future automotive OEMs and manufacturing facilities may work directly together. For instance, Volkswagen has already begun corresponding with foundries like TSMC and Global Foundries, as well as chip designer Qualcomm. Additionally, in order to better control semiconductor devices, automakers are opting for self-designed processors.
3. Rise of 5G
In 2023, 5G network deployment is likely to continue, resulting in increased demand for innovative semiconductor trends and devices. Semiconductor firms are concentrating on creating processors that can handle 5G technology. This includes neuromorphic analog technology and gate-all-around FETs, which are essential for IoT devices that will rely on 5G and AI.
Semiconductor businesses are positioning themselves to seize this opportunity as the fifth generation of wireless technology is slated to alter the connection, automation, and IoT industries. The need for 5G technologies and semiconductor devices that can enable these applications is also anticipated to rise as society moves toward smart technology, smart cities, and autonomous vehicles.
To Summarize
The semiconductor market is expanding and changing significantly. The semiconductor chip business is primed to exhibit tremendous development, with continuous expansion anticipated over the next five years despite obstacles like the global chip shortage.
Among the crucial semiconductor mega trends are China’s boom and the rising demand for semiconductors in the automotive industry. Significant demand for new semiconductor technologies and devices is anticipated to be driven by 5G technology as well. It is important to remember that the sector needs large capital outlays, technical know-how, and technological innovation to stay competitive, especially given how it is continuing to influence the modern world.
With its major drivers, including electrification and automation, as well as ongoing technological advancements, the semiconductor industry is poised to play a crucial role in determining the future. Despite persistent supply issues, the semiconductor industry is one to watch due to its great growth potential and rising consumer demand.