A RECOVERY ANTICIPATED THIS YEAR

Market Correction: The Semiconductor market is experiencing a correction due to a slowdown in demand and an inventory glut built from overbuying between 2020-2022.

• For some families, pricing is falling as suppliers compete and deplete inventories.
• Semiconductor industry revenue fell 8% in 2023 over 2022 to USD 527 billion.

Recovery Forecasted: While uncertainties remain, a modest recovery is forecasted for the second half of 2024, driven by high-performance computing, Artificial Intelligence (AI), and gradual smartphone inventory reduction.

• The Semiconductor Industry Association has forecasted growth momentum to rebound by over 13% for the industry revenue to reach USD 600 billion in 2024.
   

MARKET IN TWO SPEEDS

• Semiconductor companies supplying Cloud Data Center customers are experiencing strong demand for chips used in AI-capable servers, including memory chips and AI-related GPUs.
• These chips are in high demand because they can handle the vast amount of data required to develop AI models.
• Semiconductor companies that supply general-purpose chips and cater to a broader range of market segments are experiencing a decline in demand from industrial, medical, consumer, and automotive customers due to an inventory glut created by overbuying during the 2020-2022 demand surge.
• With advanced technology becoming increasingly integrated into society and semiconductor chips playing a critical role, the long-term outlook appears strong.
• The industry is anticipated to reach USD 1 trillion in revenue by 2030. There will be a significant increase in semiconductor demand for applications such as AI, high-performance computing, factory automation, Advanced Driver Assistance Systems (ADAS) in Automotive, and image recognition for healthcare applications.

SUPPLY

• The semiconductor industry continues to face several challenges and uncertainties, including supply chain disruptions, geopolitical tensions, and adapting to evolving consumer demands.
• As a result, many companies are responding to sluggish requests by implementing order reductions, price adjustments, and inventory recalibration.
• Despite the prevailing market headwinds, some indications of recovery are expected in the second half of 2024.
• This recovery is driven by the increased demand for high-performance computing and a gradual reduction in smartphone inventory.
• It remains crucial to monitor the dynamic shifts in the market landscape closely.
• Although most lead times have returned to normal, several suppliers and distributors continue to face relatively high inventory levels.
• As a result, their capacity utilization rates have remained around 60%. This situation has resulted in financial implications and questions concerning the viability of continuing to manufacture certain products.
• Geopolitical considerations have prompted many companies to take significant steps towards enhancing supply chain resilience, including buffer stocks, dual designs, and frontend localization.
• The rising global demand for AI components is expected to fuel future growth.

SPOTLIGHT

Texas Instruments (TI)

• During its Q4 2023 earnings call, Texas Instruments (TI) reported a decline in the industrial segment and a sequential decline in automotive.
• In response to the market softening, TI has demonstrated its agility by focusing on competitiveness and capturing market share from Asia-based suppliers.
• Notably, TI has expanded capital expenditure in their RFAB2 and LFAB facilities.
• These strategic investments are aimed at supporting the anticipated market ramp-up.
• Generally, most of their lead times have returned to normal except for certain product families.

New Capacity Investments Announced in 2023

• Front End Fab:
  • Lehi Fab – Acquired from Micron. Advanced Analog and Embedded Processing - Operational in December 2022
    • 65-nm nodes (F65/C021).
  • Lehi Fab2 - Ready in 2026
  • Sherman Fab (Texas) – Ready in 2025
    • Size of four RFAB2s
    • 300-mm

Monolithic Power Systems

• MPS lead times improved to 26 weeks for standard and automotive products.

Onsemi (rebranded from ON Semiconductor)

• Standard analog: AC/DC, DC/DC, Interface (RS232, R485), VR, LDO, Driver, Mixed Signal/Amplifiers, and Comparators are all quoted at 12 to 26 weeks lead time, representing an improvement.
• CW/RW will improve to 60 days for PSG (Power Solutions Group) parts, excluding automotive.
• Analog Portfolio will continue to remain at 180 days until further notice.
• LTSA  Program: Due to market softening, some OEMs have been discussing the program and attempting to reduce their liabilities.
• This remains a key program for Onsemi, and OEMs shouldn’t expect to remove any liability without negotiation

Renesas

• With the market softening currently, Renesas has improved the lead time of its Analog and Power products to 18 to 24 weeks.

Diodes, Inc.

• Diodes anticipates a broad-based slowdown in the global industrial market and some softness in the automotive market.
• This is primarily due to customer inventory adjustments and excess inventory on the Distribution side.
• Leadtime ranges between 10 and 16 weeks

STM

• Standard Linear Product lead times have improved to 16 to 24 weeks.
• Customer warranties/returns (CW/RW) for all these standard products have resumed to a four-week window effective from early 2024.
• STM CapEx expansion mainly focuses on internal wafer fabs, such as automotive MCUs, SICs, analog, discrete, MOSFETs, and sensors. 
• Most of their MCUs are still outsourced through TSMC’s 8-inch wafer fabs. Some internal fabs, such as Crolles 12 inches, Rousset, Agrate, Catania (SiC), and Singapore (SiC), also exist.

ADI

• ADI has made a special arrangement with TSMC to supply long-term wafer capacity through Japan Advanced Semiconductor Manufacturing (JASM), a TSMC majority-owned subsidiary in Kumamoto Prefecture, Japan.
• This is to secure the additional capacity of fine-pitch technology nodes to serve critical platforms, including wireless BMS (wBMS) and Gigabit Multimedia Serial Link (GMSL) applications.
• ADI expected revenue to moderate given the continued economic uncertainty and normalizing supply Chain.
• Leadtime: 93% of Part < 13 weeks
• ADI/MAXIM ERP Integration – Target closure February 2024

MARKET DYNAMICS

• The development of supply chains has been driven by the geopolitical landscape, resulting in investments being made in Southeast Asia, Europe, and North America, both for China-related and non-China-related supply.
• The AI market is a rapidly growing sector, and the demand for AI chips will continue to increase steadily over the coming years.
• The major players in the market include Amazon, Google, Apple, Facebook, IBM, and Microsoft.
• The alignment of the automotive and industrial sectors with global electrification trends is expected to normalize inventory levels by the second half of 2024.
• Renesas acquired the software design company Altium for USD 5.9 Billion.

PRICE

• The semiconductor market is navigating a significant correction of demand and inventory.
• The abundance of chip supply has pressured suppliers to reduce pricing to clear excess inventory and remain competitive.
• Distributors are also offloading their excess inventory to the open market, which can further impact market prices and reduce inventory liabilities.
• The price will remain flat for high-performance analog products, as most are tied to OEM contract prices.
  • Renesas – Flat
  • Onsemi –  Flat.
  • ADI –Price increase on old Legacy devices across L- Maxim, L-ADI
  • STM – Flat
  • Diodes – minimal reductions
  • TI – minimal reductions
• We anticipate that price trends in the semiconductor space will be flat, with the potential for a slight cost reduction through the calendar year, dependent on the market conditions and product families.

SUPPLY

• Most suppliers experienced a significant decrease in demand in Q1 2024 but are expected to see a modest recovery in the second half of 2024.
• As for Q2 2024, suppliers anticipate a slight reduction in utilization rates.
• Lead times have been lowered for standard logic.
• Most industries are still grappling with plentiful inventory and cyclical pressures.
• Most Logic supplier’s lead times have stabilized.
• Most suppliers’ capacity utilization is below 80% and a book-to-bill ratio of less than 1.0.
• Automotive and Industrial demands will continue to grow in 2024 but slower than in 2023.
• Texas Instruments (TI) has gone through significant optimization and technology transitions to newer nodes in the past six to eight quarters to improve capacity. This effort enhances resiliency and mitigates against future supply chain constraints.
• TI has significantly improved lead time, except for Automotive devices.
  • Logic lead time is generally six weeks, and TI is chasing increased market share by providing competitive prices and demonstrating improved supply.
• Nexperia advised that lead times are generally six to eight weeks, and they are chasing more orders on Pico Gates Logic.
• They see improved visibility in semiconductor growth as the extended inventory correction concludes in major market segments like PCs and smartphones.
• Onsemi transferred the standard logic portfolio manufactured in Tower to Vanguard Semiconductor (Taiwan), consolidating backend manufacturing sites for similar packages for 90% of the logic portfolio except for the metal gates.

MARKET DYNAMICS

• TSMC believes that inventory will return to a healthier level. Still, the weak macro environment and geopolitical uncertainties may persist, impacting consumer sentiment and end-market demand.
• UMC and Vanguard International Semiconductor (VIS) experienced significant performance decreases in 2023 but are expected to see modest recovery in 2024. UMC anticipates a slight fall in utilization rates and rising wafer shipments of 2-3% year-on-year in the first quarter of 2024.
• In 2023, Generative AI grew exponentially, becoming the hottest technology trend reported by the media. New technology commercialization is expected in 2024, especially in related applications for edge-AI devices.
• Three things are certain for the electronic component market in 2024.
  • Excess electronic component inventory will still be an issue for the first half 2024.
  • Most industry markets will begin to benefit from a return of demand in the second half of 2024, although the level of rebound is still uncertain.
  • Artificial Intelligence will continue to drive demand in 2024 and through 2025.  

PRICE

• Suppliers want to secure more orders with competitive prices to win and capture more share amidst sluggish demand.
• Texas Instruments and Nexperia are aggressive on price to win more share due to declining demands and order books.
• ONSEMI stays flat on pricing and believes that the LTSA (Long Term Support Agreement) is holding firm for supply/demand on Logic.

SUPPLY

• Due to high-interest rates and relatively high inflation, the Automotive market is experiencing slower growth.
• Car manufacturers are therefore adjusting schedule given the expected slower growth in 2024.
• Supply is improving as the market correction continues. Although inventory of continues to be high, demand reductions are slowing down inventory depletion.
• Suppliers continue to maintain high-capacity utilization by correcting demand and supply.
• Average lead time based on technology:

Infineon supply is stable with slight reductions in lead time. Pricing remains flat for  Infineon.

• Front End:
  • Given their undisputed leadership position in the power system, Infineon added additional investment in SiC for the third phase of their Kulim plant, which will expand capacity 15X compared to 2023. The third phase is targeted for mass production in 2027.
• Back End:
  • The expansion of backend manufacturing capacity in Batam (Indonesia), mainly for automotive power IC, is expected to be ready for production in 2024.
• Onsemi product lead times continue to improve. With demand continuing to weaken, some adjustments are being negotiated between OEMs and Onsemi. Onsemi further extends the relaxation of their 180-day NCNR terms to the Mosfet portfolio to 60 days.
• To capture market share in the SiC space, Onsemi continues to expand SiC fully and fight for more market share in this new frontier.
• Front End:
  • EFK (12-inch) multi-year expansion underway, including Mosfet Trench, IGBT for modules, and Analog BCD
  • BK6 (6-inch) expanding SiC Epi and wafer capacity
  • CZ4 6-inch, 8-inch) FRD rectifier transfer and expansion from BK8 and Bare K6 underway.
• Backend Assembly:
  • Expansion of 50K sq ft assembly and test capacity per year
  • Expansion of Power discrete and module multi-source capabilities
     
• STM lead time remains flat, and it is not impacted by a slower book-to-bill ratio as their existing backlog is still high.
• Given the anticipated market recovery in 2025, STM is still going full force on the expansion of Tour, and Catania via an internal upgrade to 200mm wafers to increase silicon-based Discrete Products.
• For SiC, multiple front-end sites such as Catania, Singapore, Chongqing (2025), and backend sites Bouskoura and Shenzhen are in progress to ensure STM can support in the future.
• Nexperia lead time continues to improve, and despite slower market demand, continues to front-load production with 90% capacity utilization in preparation for the market's upcycle and to maintain cost competitiveness.
• Pricing remains competitive, and Nexperia’s strategy of early relaxation for more flexible terms and conditions such as cancellation and rescheduling and a more aggressive pricing strategy to capture market share is paying off — shown by an increase in market share when the overall market is on the downtrend.
  • • Front End:
      • Wafer fab in Hamburg (Germany) and Manchester – Ongoing conversion from six to eight inches.
      • Nexperia also continues negotiating and adding external foundries for increased wafer capacity.
      •  A new 300mm (12-inch) wafer fab in Lingang (Shanghai) is scheduled to go online in the middle of 2024.
    • Back End:
      • Expanding their Dongguan (China) factory.
      • Investing extra capacity in Cabuyao (Philippines) and Seremban (Malaysia).
      • Implementation of advanced automation.

MARKET DYNAMICS

• Market correction continues in 2024, with multiple market intelligent forecasting market recovery at the end of 2024; the Discrete market is monitoring indicative segments, such as the memory market, for any signal of market recovery.
• PC-segment Original Design Manufacturers (ODMs) have expressed optimism for 2024 due to factors like the replacement cycle of laptops, the end of Windows 10 support, and the potential impact of AI-powered PCs.

PRICE

• The general price trend stabilizes after a few quarters of price adjustments. Suppliers’ pricing strategy is changing to targeted cost down for new opportunities to increase their market share and maintain pricing for existing business.
• Some suppliers are reducing costs strategically based on business potential rather than firm demand in preparation for the upcycle in 2025.
• Although price adjustment is in place, price levels are generally still above pre-COVID pricing due to factors such as inflation in raw materials, energy, logistics, and labor.
• A small wave of price increases occurred in January for Mosfet products of a few small Chinese manufacturers, who claimed their pricing was not sustainable due to excessive cost reductions during the 2023 market slowdown in China.

SUPPLY

• Supply is normal for most Optocouplers, InfraRed devices, and optical sensors manufacturers.  
• Lead times for Optocouplers and SSR products from Japanese manufacturers have not improved and are unlikely to throughout the rest of the year.
• Some Optocoupler suppliers have extended their lead times due to chip delivery. 
• Raw materials such as PCBs and Substrates remain tight, and accurate forecasts are required, or short-term orders may not be fulfilled.     
• Automotive demand softened, resulting in overall demand and supply returning to normal.
• The lead times provided by the large organizations are currently flat; however, we anticipate they will extend slightly as automotive shipments pick up in the coming quarters. 
• Lead times remain at the 15-28 weeks level outside of Asia, which will maintain their lead times at eight to 16 weeks. 
• Opto suppliers have quoted increased capacity utilization rates, which will continue to increase gradually in the coming quarters.

MARKET DYNAMICS

• Top-tier suppliers focus on developing the Automotive or EV, Healthcare, and Industrial markets.
• New products for automotive applications will launch in the next few quarters.  
• As EV vehicle prices drop, EV manufacturers continue to explore Asian base suppliers for cost reduction. Smaller scale companies are investing to qualify as an automotive supplier. 
• American and European customers have started sourcing materials from non-China suppliers to create a more resilient supply base.

PRICE

• Prices are stable for all product types in the first half of 2024. Suppliers are maintaining price levels as the demand is not clear, and the cost of raw materials has fluctuated. Most suppliers are reactive in maintaining pricing levels to keep their market share.  
• Suppliers are open to reviewing the price for new opportunities and demands, such as new projects.
• The automotive and Healthcare sectors' growth is stable, and customers are still conservative with their forecasts.
• Consumer market demand remains low, but the market is depleting inventory, which should be cleared in the first half 2024.

SUPPLY

• DDR4/DDR5: Some Constraints.
• DDR3: There are a few constraints but some available production options.
• Legacy (SDRAM, DDR1,2): Stable (Look to 2nd tier suppliers for support)

MARKET DYNAMICS

• China’s CAC has excluded using Micron Products for Critical Information Infrastructure in China.
• CAC is notifying Critical Infrastructure companies directly.  Follow GCM Alerts as more information becomes available.
• We anticipate the market stabilizing in 2024 with limited bit growth but gradually rising AI and 5G. Uncertainty remains in the market, and factories report lower lead times and product availability.
• Demand is lower than the production rate in Q4 2023 and Q1 2024. Lead times are normalizing.
• Major suppliers are downgrading growth predictions for the first half of 2024. 
• Suppliers are reporting capacity in DDR3. Look for support from most suppliers as deals can be made.
• DDR4/DDR5 pricing will increase yearly as suppliers move to profitability (as much as 40%).
• PC and Server demand continues normalizing, and Handset demand has increased. 
• Look for and take advantage of Short-term SPOT-Market lower pricing and over-supply opportunities.

PRICE

• DDR4/DDR5: Some increases.
• DDR3: Some decreases.
• Legacy (SDRAM, DDR1,2): Some decreases.

SUPPLY

• Asynchronous :

  • Low Power: stable

  • Fast SRAM: stable

  • Slow SRAM: stable

• Synchronous:

  • Quad Data Rate: stable

PRICE

• Asynchronous: stable
• Synchronous: stable

SUPPLY

• Planar NAND: some constraints
• 3D NAND Flash: some constraints

MARKET DYNAMICS

ALERT: The Cybersecurity Administration of China (CAC) has prohibited the use of Micron products for critical information infrastructure within China and is notifying essential companies directly about the infrastructure.

• Expect price increases in Nand Flash products and related products using Nand Flash (eMMC and SSDs) as suppliers try to return to profitability. Continue to forecast effectively. Take advantage of over-supply pricing and Spot Market pricing where applicable.
• As major suppliers try to raise prices on high-density Flash and high-sensitivity SSD, push back or involve GCM for help. If possible, look for second-tier suppliers for support.
• The Ukraine/Russia Conflict is reportedly not likely to cause further impact on Flash production or pricing, but customers need to be kept aware should consequences arise.
• Short-term demand looks to increase in 2024, and pricing reflects this. Pricing will stay high for the second half of supply/demand. Give suppliers as much forecast and hard orders as possible to ensure supply.

PRICE

• Planar NAND: Increasing
• 3D NAND Flash: Increasing

SUPPLY

• Low-Mid Density NOR:  some constrained
• High Density NOR: some constraints

MARKET DYNAMICS

• NOR Flash memory is anticipated to remain tight through 2024.
• The rising popularity of true wireless products is expected to continue increasing demand for NOR Flash memory through 2024. Coupled with 5G product introductions and AI applications, this could make supply tight. Stay aware of market issues.
• NOR Flash Foundry partners also see increased demand from non-Memory products that yield higher margins, limiting NOR Flash's capacity expansion plans.
• The Ukraine/Russia conflict will not likely cause material shortages, but customers must be vigilant. 
• Look to second-tier suppliers for support.  GCM can help with alternatives.

PRICE

• Low-Mid Density NOR: Flat
• High Density NOR: Flat

SUPPLY

• EEPROM: Stable.

MARKET DYNAMICS

• EEPROM is a matured memory technology.
• Stable demand and a supply base are supporting the marketplace today.
• Balanced market conditions are expected to continue throughout 2024.
• Make sure to monitor lead times and give ample forecasts.
• Major suppliers are normalizing L/T’s and have capacity.  Also, look to  2nd tier suppliers for support.

PRICE

• EEPROM: Stable.

SUPPLY

• Some constraints.

MARKET DYNAMICS

ALERT: China's Cybersecurity Administration (CAC) has prohibited the use of Micron products for critical information infrastructure within China.

• SSD growth for 2024 in Automotive applications is expected to outperform previous years.
• Growth in Half Height, Half Length (HHHL) is also expected to increase in 2024.  These form factors provide better performance.
• PCle SSDs offer Higher performance and reduced latency.
• The demand for SSDs has rapidly increased in the emerging Cloud platforms.
• Presently, SSD costs are still higher than HDD, but 3D Nand Flash costs are changing  dramatically in 2024
• Look at suppliers looking for short-term offers.  Take advantage of pricing where possible.

PRICE

• Some constraints

SUPPLY

• Market demand remains sluggish across most market segments. Suppliers are focusing on design-in on new projects to secure orders. 
• Manufacturers and distributors have high inventory levels and are still looking to deplete stock. Monitoring the market demand status remains crucial.
• Suppliers are reviewing their product portfolios to phase out legacy products.  We still see a shortage of those products as no replacements are available due to slim margins. OEMs must be aware of and alert to the suppliers' EOL notices.

MARKET DYNAMICS

• Demand growth for automotive electrification and Healthcare applications is muted. Suppliers are focusing on EV-related technology investment, while the Industrial segment is comparatively stable.    
• The growing artificial intelligence (AI) market requires various new smart sensors.
• Many OEMs are looking at an “Out of China” sourcing strategy as the geopolitical issues are expected to continue in the coming years.

PRICE

• Pricing is flat as market demand remains low. Suppliers balance the pricing to maintain the business and sustain production capacity utilization rates. High inventory levels in the supply chain still need to be depleted. 
• Raw material and foundry costs are increasing. Suppliers are under high financial pressure to maintain their businesses. Manufacturers' price strategies may change if the market situation does not pick up as expected in the second half of 2024.

SUPPLY

• Most Suppliers' capacity utilization is less than 80%, and book-to-bill ratios are less than 1.
• A market correction that impacts revenue and unit-to-be-shipped is well underway and will continue through the first half of 2024. 
• Lead times gradually reduced and now hover between 12 and 30 weeks. Most of the Timing IC suppliers have improved CW/RW.
• ST recently revised to four weeks CW/RW.
• Microchip suspended the PSP program. New orders will no longer be flagged PSP and will be managed under standard T&Cs. Existing orders flagged under PSP will remain executed under the PSP conditions.
• Texas Instruments - Timing eight to 12 weeks; Texas Instruments’ second fab in Utah (USA) and the testing plant in Chengdu are in production this year, and book-to-bill ratios are less than 1.
• A market correction that impacts revenue and unit-to-be-shipped is well underway and will continue through the first
• ADI – Increased allocations at external Fabs.  Queue times reduced. Assembly constraints were largely eliminated. Test constraints improved, but legacy LTC parts still face some challenges. Lead-frame and laminate material shortages were resolved. 80% of portfolio lead times at less than 13 weeks. ADI plans a USD 1B upgrade of the Oregon plant.
• NXP is positive on automotive parts, with steady growth in demand in its order book. NXP is considering increasing investment in the Indian semiconductors market. NXP’s DAP (Demand Assurance Program) continues for 2024 for selected MPNs, mainly covering the Automotive segment.
• ST plans to invest USD 4B to increase the wafer production capacity. ST projected that the automotive and industrial sectors will grow significantly more than average by 10.9% and 7.1%.

MARKET DYNAMICS

• Demand trends from automotive and core industrial OEMs continue at robust levels, as the supply constraints seen in the past couple of years have prevented them from growing at their desired rate.
• The automotive electronics segment will continue to record double-digit growth over the next three years as semiconductor content per vehicle will increase due to the transition to electric and autonomous vehicles. The average semiconductor content per vehicle is projected to grow from USD 712 in 2022 to USD 931 in 2025.
• The historically cyclical and recently challenged semiconductor industry is poised for a rebound in the second half of 2024, with generative AI catalyzing growth amidst geopolitical complexities. Despite potential headwinds, the sector anticipates a resurgence in chip sales, driven by innovative AI applications and increased demand across key market segments.

PRICE

• Most timing IC Suppliers remained unchanged through the first half of 2024. Pricing levels are still holding firm. Delivery and prices are expected to stabilize, except for automotive-grade and application-specific semiconductor products, which are still relatively high. 
• ADI and Renesas indicated the price increase on legacy parts due to higher cost structures and lower production levels.
• Demand from the enterprise, data center, and Automotive sectors is holding up, so there is little incentive to reduce.
• Suppliers are not aggressively looking to trade cost reductions for increased share.