MARKET OVERVIEW Global semiconductor manufacturing industry strength up in Q1 2024

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The latest report from SEMI industry association indicates that the semiconductor manufacturing industry is experiencing a period of growth. Sales are increasing, with integrated chips representing the most significant growth area. Inventories are stabilising, and factories are expanding in order to meet the growing demand, particularly for powerful AI chips. It is anticipated that this trend will continue throughout the second half of the year. Is this pointing towards an overall recovery?

Key measures of global semiconductor manufacturing industry strength improved in the first quarter of 2024, showing signs of improvement with an uptick in electronic sales, stabilizing inventories, and an increase in installed wafer fab capacity.

This is according to the SEMI industry association which published its Q1 2024 publication of the Semiconductor Manufacturing Monitor (SMM) Report, which was prepared in partnership with TechInsights.

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Sales rise 1 % year-over-year

According to the report, electronic sales rose 1 % year-over-year (YoY) in Q1 2024, with the Q2 2024 forecast expected to register a 5 % YoY increase.

Integrated chip sales saw the biggest YoY growth with a 22 % figure and are expected to surge a further 21 % in Q2 2024 as shipments of high-performance computing chips increase and memory pricing continues to improve. Integrated chip inventory levels stabilized in Q1 2024 and are expected to improve further in the second quarter.

Meanwhile, installed wafer fab capacity continues to increase. SEMI expects that capacity will exceed 40 million wafers per quarter (in 300mm wafer equivalent), rising 1.2 % in Q1 2024 with an expected 1.4 % uptick in Q2 2024.

Among all regions, it’s China that continues to register the highest capacity growth, but fab utilization rates remain a concern with little signs of recovery expected in the first half of the year. Memory utilization rates were also lower than expected in Q1 2024 due to disciplined supply control.

Semiconductor capex remains conservative

The report also outlines that in line with suppressed fab utilization trends, semiconductor capital expenditure also remains conservative. This fell 17 % YoY in Q4 2023 and continued to drop by 11 % YoY in Q1 2024 before making a 0.7 % gain in Q2 2024.

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A brief overview of AI chips vs traditional chips

Demand in some semiconductor segments is recovering, but the pace of recovery is uneven," said Clark Tseng, Senior Director of Market Intelligence at SEMI. "AI chips and high-bandwidth memory are currently among devices in the highest demand, leading to increased investment and capacity expansion in these areas. However, the impact of AI chips on IC shipment growth remains limited due to their reliance on a small number of key suppliers."

"Semiconductor demand in the first half of 2024 is mixed, with memory and logic rebounding due to surging generative AI demand," said Boris Metodiev, Director of Market Analysis at TechInsights. "However, analog, discrete, and optoelectronics have experienced a slight correction due to the slow recovery of the consumer market coupled with a pullback in demand from the automotive and industrial markets."

"A full-on recovery is likely to take hold in the second half of the year with the projected boost in consumer demand by AI's expansion to the edge," Metodiev said.

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