This October we’re pleased to share the Future Horizons Semiconductor Update. Check it out below for the latest industry insights:
Executive Summary
Annualised growth rates somewhat retreated in August, with Total Semiconductors growing 21.6 percent, down from last month’s 26.0 percent, but up from June’s 18.0 percent, 6.9 percentage points down from August 2024’s 28.5 percent cyclical peak.
Encouragingly, all three sectors still showed positive annualised growth, with Total ICs continuing their lead as the prime industry growth driver at a robust 24.5 percent, albeit down slightly from last month’s 29.3 percent number, with Opto up 3.5 percent and Discretes up 3.6 percent, vs. last month’s 8.0 percent and 6.9 percent respectively.
Whilst the overall semiconductor market still showed a strong double-digit growth, the overall trend is flat, at around the 20 percent plus/minus level, varying from August 2024’s 36.2 percent peak to January 2025’s 14.8 percent low.
These peaks do not last forever, nor do they turn up, and we continue to expect to see this trend turn down in the coming months, as per past cyclical patterns, with the only uncertainty being as to when this will happen.
Forecast Update
August saw the overall semiconductor market grow 21.6 percent vs. August 2024, driven by a 24.5 percent value growth in ICs. That in turn was the result of a 6.5 percent annualised growth in IC unit shipments and a whopping 16.9 percent increase in IC ASPs.
At the same time, Discretes grew 3.6 percent, their sixth consecutive month of positive annualised growth, firmly cementing the end of their two-year recession since their June 2022 collapse.
Whilst a recovery in Discretes does not mean the broader industry recession is over, we need a return to IC unit growth for that, it is a necessary pre-requisite and a huge step in the right direction.
Logic’s 38.6 percent annualised growth in August re-enforced its displacement of Memory, at just 17.6 percent growth, as the overall IC sector’s star growth performer.
It is still not clear what is driving Logic’s strong growth, which flies in the face of historical growth and competitive patterns, and it is more in synch with Memory than the other product segments. It is also ASP, not unit driven, which defies decades old semiconductor ethos and conventional economic wisdom.
Growth built on increasing ASPs is unsustainable and always collapses.
On a regional basis, annualised growth in Europe fell back to 2.5 percent, down from 5.6 percent in July and 5.9 percent in June, vs. the overall 21.6 percent market growth.
This was clearly not the best of news for Europe, with only Japan faring worse. In contrast, AsiaPac, the Americas and China saw strong double-digit annualised growth, at 53.5 percent, 15.7 percent and 15.1 percent respectively.
The AI data centre frenzy continued to dominate the chip market agenda in September, with TSMC as the main beneficiary. Its preliminary third quarter revenues surpassed all forecasts, including its own guidance, as AI-related chip sales drove advanced process demand.
With TSMC’s fortunes increasingly joined at the hip to the somewhat circular AI economy, we can expect more of the same all the while the AI market stays red hot but watch out for a painful contraction should (when?) the AI exuberance runs its course.
There are no other outlets of any meaningful size to replace the current AI-chip centric, advanced node process sales.
Only time will tell if the AI bubble concerns are real, or if the crash, if it comes, will be less or more severe. In the meanwhile, opportunity and greed will overcome any fears before the whole thing goes ka-boom.
One thing, at least to us, is clear. ChatGPT and its stablemates are never going to generate sufficient financial returns to justify the current trillion-dollar infrastructure investments, and there is still no obvious or affordable application-driven product that will trigger a billion plus annual unit sales, as with the PC and Smartphone era.
Technology enablers, like AI, do not generate revenue per se, but they eventually spawn the next generation of killer products that do. That day has yet to dawn.
Read The Full Report Here: https://www.futurehorizons.com/page/137/
