The Semiconductor Industry Association (SIA) announced that the global semiconductor industry sales totaled $149.9 billion in the second quarter of 2024, a 18.3% increase compared to the second quarter of 2023, and a 6.5% increase compared to the first quarter of 2024. The sales in June 2024 were $50 billion, a 1.7% increase compared to $49.1 billion in May 2024. The monthly sales figures are compiled by the World Semiconductor Trade Statistics (WSTS) organization and represent a three-month moving average. In terms of revenue, the chip companies counted by SIA account for 99% of the U.S. semiconductor industry and nearly two-thirds of the non-U.S. semiconductor industry.
SIA President and CEO John Neuffer said: "The global semiconductor market remained strong in the second quarter of 2024, with quarterly sales increasing for the first time since the fourth quarter of 2023. Sales in June increased month-over-month and year-over-year, with the Americas market leading with a 42.8% increase compared to June 2023."
Regionally, in addition to the year-over-year growth in the Americas, sales increased in Mainland China (21.6%) and the Asia Pacific region/All Other (12.7%), but decreased in Japan (-5.0%) and Europe (-11.2%). Monthly sales in June increased in the Americas (6.3%), Japan (1.8%), and Mainland China (0.8%), but decreased in Europe (-1.0%) and the Asia Pacific region/All Other markets (-1.4%).
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The start of 2024 was slow, but prepared for growth
According to WSTS data, the global semiconductor market size in the first quarter of 2024 was $137.7 billion. The first quarter of 2024 decreased by 5.7% compared to the fourth quarter of 2023, but increased by 15.2% compared to the same period last year. The first quarter of the year is usually seasonally lower than the fourth quarter of the previous year. However, the 5.7% decline in the first quarter of 2024 was worse than expected.
The performance of major semiconductor companies in the first quarter of 2024 was mixed. The change in revenue from the fourth quarter of 2023 to the first quarter of 2024 ranged from a 23% increase reported by Micron Technology to a 19% decrease reported by STMicroelectronics. Revenue increased for 5 companies and decreased for 9 companies. Nvidia continued to be the largest semiconductor company, with revenue of $26 billion. The total revenue of the top-ranking companies increased by 2%, with memory chip manufacturers increasing by 12%, and non-memory manufacturers decreasing by 2%.
Companies provided different revenue guidance for the second quarter of 2024. Micron expects continued strong demand for memory chips and forecasts a 13% increase in revenue for the second quarter of 2024 compared to the first quarter of 2024. Seven other companies expect an increase in revenue for the second quarter of 2024. Artificial Intelligence (AI) is listed as the main growth driver by Nvidia, Samsung, and SK Hynix. NXP Semiconductors expects the second quarter of 2024 to be flat compared to the first quarter of 2024. Three companies expect a decline. Qualcomm and MediaTek see a seasonal decline in smartphones. STMicroelectronics has the lowest revenue guidance, with a 7.6% decrease due to excess inventory in the industrial sector. The combined outlook for the second quarter of 2024 from the 12 companies providing guidance is for a 3% increase.The recent estimates for the semiconductor market growth rate in 2024 range from 4.9% to 28%. However, the forecasts since the release of the WSTS first-quarter data in early May have been significantly different from the previous ones. The forecasts released in February and March ranged from 17% by DigiTimes to 28% by UBS. According to the WSTS data for the first quarter of 2024, Future Horizons revised the forecast for 2024 from 16% in January to 4.9% in May. Other forecasts in May come from the Cowan LRA model at 10% and TECHCET at 12%. Semiconductor Intelligence (SC-IQ) has revised the expected growth rate for 2024 from 18% in February to 11% in May.
In our April 2024 newsletter, we pointed out that 2024 should see robust growth in key end markets such as PCs and smartphones. Some markets that have seen growth in recent years, such as automotive and industrial, seem to be weakening. Artificial intelligence is an emerging growth driver. According to the International Monetary Fund, the global economy is expected to grow steadily by 3.2% over the next two years. These factors should support healthy growth in the semiconductor market in 2024 and 2025. However, earlier forecasts of 20% or higher growth for 2024 are unlikely to be proven correct.
Wafer Foundry Industry Recovery
With the increase in electronic sales, stabilization of inventory, and expansion of wafer fab capacity, the global semiconductor manufacturing industry showed signs of improvement in the first quarter of 2024. Stronger growth in the industry is expected in the second half of the year.
J.P. Morgan Securities pointed out in the latest "Wafer Foundry Industry" report that the wafer foundry inventory reduction will end, and the industry's prosperity will widely recover in the second half of 2024 and further strengthen in 2025.
Gokul Hariharan, head of research for J.P. Morgan Securities in Taiwan, China, analyzed that the prosperity bottomed out in the first quarter, coupled with the continuous rise in AI demand and the gradual recovery of non-AI demand. More importantly, urgent orders have begun to emerge, including large-size panel driver ICs (LDDIC), power management ICs (PMIC), and WiFi 5 and WiFi 6 chips, all of which clearly show that the wafer foundry industry has emerged from the trough and is turning to recovery.
It is worth noting that the recovery speed of the utilization rate of wafer foundry factories in mainland China is relatively fast, mainly because mainland foundry-free semiconductor companies started to adjust inventory earlier. After actively reducing inventory for the previous six quarters, the inventory is gradually normalizing.
In terms of non-AI demand, the consumer, communication, and computing verticals in the 3C field also bottomed out in the first quarter of this year; however, automotive and industrial demand may recover at the end of 2024 and the beginning of 2025, mainly due to the overall inventory adjustment being later.
SEMI pointed out that the sales of electronic terminal products in the first quarter of this year increased by 1% year-on-year, while the sales of ICs grew strongly by 22% compared to the same period last year. It is expected that the sales of electronic terminal products will increase by 5% year-on-year in the second quarter, coupled with the increase in shipments of high-performance computing (HPC) chips and the continuous improvement of memory prices, which will also drive the sales of ICs to maintain strong growth, increasing by 21% year-on-year. The IC inventory level has also stabilized in the first quarter and is expected to further improve this quarter.However, SEMI frankly admits that the utilization rate of wafer fab capacity remains low, especially in the mature process field, which is still a worrying issue. There is no sign of recovery expected in the first half of this year, and the first quarter's memory utilization rate is lower than expected, mainly due to strict supply control.
The capital expenditure of wafer fabs is consistent with the trend of capacity utilization, remaining conservative. The expenditure decreased by 17% year-on-year in the fourth quarter of last year, and continued to decline by 11% in the first quarter. It is expected to return to growth in the second quarter, with a small increase of 0.7%. It is anticipated that the capital expenditure related to memory will grow by 8%, a higher increase than the non-memory field.
SEMI Global Senior Director Zeng Ruiyu stated that some semiconductor demands are recovering, but the pace of recovery is not uniform. The demand mainly comes from AI chips and high bandwidth memory (HBM), driving related field investment and capacity expansion. However, due to AI chips relying on a few key suppliers, the contribution to the growth of IC shipments is limited.
TechInsights Market Analysis Director Boris Metodiev said that the semiconductor demand in the first half of this year is mixed. Due to the surge in generative AI demand, memory and logic have rebounded, but the recovery of the consumer market is slow, coupled with the inventory adjustment of automotive and industrial market demands, which disrupts the analog IC and discrete component markets.
Metodiev expects that as AI gradually spreads to edge devices, it is expected to drive consumer demand, and semiconductors are expected to fully recover in the second half of this year. In addition, as the Federal Reserve lowers interest rates, it will increase consumer purchasing power and drive down inventory levels. The automotive and industrial control markets are expected to return to growth in the second half of this year.
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