2024 semiconductor industry outlook

Chip sales look to bounce back in 2024

The infamously cyclical semiconductor industry had a challenging year in 2023, the seventh downturn since 1990, with sales expected to be down 9.4% (to US$520 billion) for the year. But that’s not as bad as was expected in the spring; before a relatively stronger second and third quarters were in the books, the previous forecast had been for US$515 billion. 2024 is now predicted to see global sales of US$588 billion. Not only would that be 13% better than 2023, but it’s 2.5% higher than 2022’s record industry revenues of US$574 billion.

As is so often the case, the memory chip market was the biggest swing factor. In 2022, memory sales were almost US$130 billion, or just under 23% of the overall chip market, but they dropped 31% (about US$40 billion) in 2023. The market is expected to get almost all of that back in 2024, with sales expected to reach 2022 levels. If we exclude memory, the rest of the industry was down in 2023, but only by about 3%.

In terms of end markets, both PC and smartphone sales are expected to grow 4% in 2024, after 2023 declines of 14% and 3.5%, respectively. Returning to growth for these two end markets is likely important for the semiconductor industry: In 2022, communication and computer chip sales (which include data center chips) made up 56% of overall semiconductor sales for the year.

Two other important measures of the industry’s health are inventories and fab utilization. As of fall 2023, inventories remained high at more than $60 billion, about the same level as the previous year. And the process of drawing those down will be a significant headwind for sales in the first half of 2024. In addition, utilization was high during the recent shortage (in the mid-90% range) and is expected to fall below 70% in Q4 2023. The industry likely needs utilization to be much higher than that to be profitable, which could take some time.

In our 2024 semiconductor industry outlook, we drill down into five key trends for the year ahead that semi companies will have to navigate to gain a competitive advantage:

1. Generative AI accelerator chips and how semiconductor companies are using GenAI
2. Trends around smart manufacturing
   
3. The need for more assembly and test capacity worldwide
   
4. How chip industry IP is a target for cyberattacks at a whole new threat level
   
5. And a final geopolitics section that looks at export controls around advanced node manufacturing equipment and technologies, as well as advanced GenAI semiconductors
   

Download the full report to learn more about the impacts of semiconductor industry trends, key actions to take, and critical questions to ask.