The global chip industry is poised for a significant rebound this year with sales expected to jump to a record level, fueled by a greater need for the electrical components from a broad range of businesses, according to a forecast from the Semiconductor Industry Association (SIA).
Worldwide sales declined 8.2 percent to US$526.8 billion last year, although the fall was mitigated by improving conditions in the second half of the year, the association said yesterday in a statement. The increasing momentum indicates sales will gain 13 percent this year to almost US$600 billion, the SIA said.
“Global semiconductor sales were sluggish early in 2023 but rebounded strongly during the second half of the year, a trend we expect to continue in 2024,” SIA president and chief executive officer John Neuffer said. “With chips playing a larger and more important role in countless products the world depends on, the long-term outlook for the semiconductor market is extremely strong.”
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At the heart of the industry’s growth is Nvidia Corp, the most valuable chipmaker, which avoided the downturn with its market-leading artificial intelligence (AI) accelerators. Those chips are in high demand because they can handle the huge amounts of data that companies need to develop AI models.
Nvidia’s sales are projected to more than double to almost US$60 billion in the fiscal year that ended last month. Analysts project the company’s annual revenue will top US$90 billion by January 2025.
Investors are looking at the promise of future growth, particularly at chipmakers like Nvidia that they think will benefit from the boom in AI-related hardware spending. The Philadelphia Stock Exchange Semiconductor Index, which rallied 65 percent last year, was up 3.9 percent this year through Friday’s close.
Still, some of the industry’s largest companies had a difficult 2023 and posted steep declines in sales as customers cut back on orders while working through bloated inventory stockpiles. A few members of that group, including Intel Corp and Qualcomm Inc, are saying that markets are returning to normal buying patterns and the worst of the contractions are over.
According to Neuffer, the weak first half of last year was a “hangover” from the pandemic, when electronics makers struggled to get enough supply and faced unprecedented demand. That provoked many customers to order too much and find themselves caught in a glut when the economy returned to normal and purchases of devices such as personal computers slowed.
By region, Europe was the only area that posted growth last year as sales increased 4 percent. China and the Asia Pacific region posted the steepest declines, with China revenue, the biggest block of sales for the industry, down 14 percent. In the Americas, the market contracted 5.2 percent.
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