2023 WW Revenues hit pause in their growth

After peaking at $600B in 2022, global semiconductor revenue fell almost 9% in 2023 to $545B. Even with this retreat in global revenue, the semiconductor industry is still forecast to achieve $1T in revenue by 2030.  The memory segment (DRAM and FLASH) had the largest impact on global revenue, which contracted by 34%, or $50B. It should be noted, however, that overall semiconductor global revenues, excluding the memory decline, were flat year over year at approximately $450B.

Despite Intel’s revenue decreasing by almost 16%, it regained the number one spot from Samsung, which faced a significant drop due to its memory segment. The biggest winner in 2023 was NVIDIA, which increased its revenue by a whopping $28B, or 133%, for the year and moved it into the number two spot!  Other notable changes in the top 10 include Texas Instruments, which moved from 9th to 11th place, Micron, which dropped from 6th to 12th, and MediaTek, which slid from 10th to 13th. These shifts saw revenue growers like Apple climb from 11th to 8th as they continued to expand their product portfolio. At the same time, Infineon moved from 13th to 9th, and STMicroelectronics advanced from 12th to 10th, benefiting from the surge in automotive semiconductor demand.

The top twenty-five (25) semiconductor suppliers represent almost 82% of global semiconductor revenues.

Cyclicality has long been a defining characteristic of the semiconductor industry, tracing back to its inception. Often dubbed the "boom and bust cycle," these fluctuations have persisted over time. However, as the industry has grown substantially, so too have the swings in year-over-year revenue. While these fluctuations remain a reality, our attention is increasingly drawn to the broader, long-term macro trends shaping the semiconductor landscape. With a collective eye on the horizon, we anticipate these cycles will persist as the long-term forecast remains the same: $1 trillion global industry by 2030.

Growth By Semiconductor Product Group

Memory, the second largest segment after Digital Logic, had the largest overall year-over-year decline. The percentage of memory for overall semiconductor revenue dropped from 24% in 2022 to 17.4% last year. The pricing volatility for DRAM and FLASH also exacerbates these dramatic changes in revenue.  In response to the challenges encountered by the memory industry in 2023, the major suppliers, including Samsung, SK Hynix, and Micron Technology, have reduced their CAPEX, decreased wafer starts, and implemented price increases. These measures were initiated in the latter part of 2023 and have continued into 2024.

The growth seen in automotive microcontrollers and high-end processors for data centers serving hyperscalers couldn't compensate for the decline in PCs and consumer devices within the segment, encompassing microprocessors (MPU), microcontrollers (MCU), and digital signal processing (DSP) devices, resulting in a year-over-year decrease of 7.9%.

Digital Logic (GPU/Base Band/FPGA/ASSP), driven by the growth in NVIDIA (GPU), Broadcom, and Apple (custom Base Band), led the growth for this segment with year-over-year growth of 9.6%. At the same time, Qualcomm and MediaTek struggled with the global slump in smartphones, particularly in China. 

Source: Omdia CLT Q4 2023

Analog semiconductors, found in the broadest range of market segments, encountered significant difficulties in the past year, with a decline of over 9%. Both Texas Instruments and Analog Devices, the sector's primary players, experienced drops in revenue, while STMicroelectronics was the only top-10 supplier in this segment to achieve growth.

The Discrete products segment, the only other segment reporting year-over-year growth, was dominated by Infineon, Onsemi, and STMicroelectronics, which all reported double-digit growth. This segment was driven by growth in Automotive, including EV and Hybrid applications, battery management, and energy storage. Technologies such as Gallium Nitride (GaN) and Silicon Carbide (SiC) are helping to drive growth in this segment.

Semiconductors by End Market Segment

From a market perspective, only Wired Communications +11.1% and Automotive +15.4% enjoyed growth this past year. Semiconductors consumed by the Automotive industry are now the third largest segment, with the highest growth of 16% CAGR over the past five years. It is, therefore, clear why so many semiconductor companies have focused on developing products and solutions for the automotive industry.

Regional Split of Global Semiconductor Revenue

Except for EMEA (driven by STMicroelectronics and Infineon), all other countries reported decreases in revenue for 2023. 

Regional: India, Vietnam in the spotlight

Alongside existing investments planned in North America and EMEA, geopolitical tensions and regional conflicts are forcing the semiconductor industry to accelerate investments into new regions.  Apart from expansion in Malaysia and Vietnam, which is mostly back-end assembly and testing, led by Intel and Samsung, India has garnered the attention of many companies.

India already employs 50,000 plus professionals working primarily in semiconductor design. The largest recognized brands investing in India include Intel, AMD, NXP, Samsung, Broadcom, Microchip, NVIDIA, Marvell, and Qualcomm, with India now focused on expanding into semiconductor manufacturing.

The Indian government has provided funding of $ 10B+ to realize a $ 62B manufacturing industry - both Front End and Back End - by 2026 and plans to expand well into the end of the decade. Early adopters are Micron Technology, a $2.75B assembly and test facility in Gujarat, Applied Materials, with a $ 400m investment in a materials engineering office, and the Mumbai-based Tata Group. Tata is a conglomerate that announced two initiatives: an assembly and test facility targeted to be in production in late 2025 and plans for front-end manufacturing in collaboration with Powerchip Semiconductor Manufacturing (PSMC). The target is to be capable of a 28nm process node, and it is planned to start production before the end of 2026.

Key elements to success will be access to qualified personnel (STEM oriented), partnerships with existing semiconductor companies and institutes, reliable power grid, eco system availability (chemicals, gases, and equipment), and improved efficiency in doing business in India as it relates to customs, tariffs, and other governmental regulations.

The US CHIPS Act and the European Chips Act (ECA)

The US CHIPS Act of 2022 will invest $50B in additional investments in the American Semiconductor Manufacturing business. This not only includes physical fabs and plants but critical investments in education, R&D, and other soft industry issues. The ECA focuses on getting Europe back to a meaningful semiconductor market share of approximately 20%—up from the current ~10% share of the global market.

Both the CHIPS Act and the ECA provide very specific criteria and limitations for semiconductor companies seeking to receive these investment funds.

During the first quarter of 2024, CHIPS Act grants were distributed to GlobalFoundries ($1.5B), Microchip ($162M), Intel ($8.5B), TSMC ($6.8B), and $300M for the US Semiconductor packaging industry.

Jabil Perspective

As the global memory market continues to adjust, with aggressive price increases in 2024, we’ll need to monitor it closely and help our customers navigate the changing landscape. Driven by new demand for leading-edge memory and storage solutions due to data center expansion supporting AI solutions, investment, capacity, and supply will be tight for the balance of 2024.

Monitoring geo-political impacts on the overall semiconductor industry.  With trade tensions continuing between the US and China, more Chinese OEMs are focused on expanding their relationship with local indigenous suppliers.  For the tier-one multisource suppliers, this will create additional growth pressures, and more commodity devices will become locally available and, in many cases, at a lower price.  For more differentiated technologies, China continues to progress, one example being 4G/5G technologies, where HiSilicon (a division of Huawei) is winning sockets from Qualcomm for Android phones. Our global commodity management teams will continue to review new suppliers and opportunities to take advantage of special pricing from suppliers on our approved vendors’ list.

KEY TAKEAWAYS

• The memory segment will continue to be volatile and, with the current price increases, will be on track to gain much of the $50B decreased revenue in 2023 back in 2024.
• Chinese suppliers producing multisource products will continue to gain share in the country with OEMs.  The larger and more successful suppliers will further accelerate their growth by qualifying for additional AVLs and driving down prices for multi-source products worldwide.
• Continued investments in data centers to support AI growth will drive further expansion for NVIDIA, as well as for major CPU suppliers and key memory and storage suppliers.
• Suppliers will continue to invest in technology and capacity. Geopolitical tensions will remain a driving force behind investments in various geographic regions, compelled by the need to mitigate risks and take advantage of investment incentives offered by different nations. This will add complexity to an already intricate supply chain.
• The current revenue decrease is only a temporary adjustment—the market is expected to remain robust, hitting $1T by 2030.