After a difficult 2023, the semiconductors has a bright future ahead of it thanks to the growing digitalisation of every aspect of society and thanks, also, to artificial intelligence. In recent years, this complex and segmented market has experienced moments of crisis in supply and demand, only to then go through a phase of enthusiasm for computing and memory components to support artificial intelligence workloads.
It is true that in 2023 the global turnover of this market is dropped by 9.4%totaling $520 billion, second Deloitte. But this year we will return to 2022 levels, also thanks to a recovery in demand for smartphones and computers from companies and consumers. Also Idc at the end of 2023 it predicted a growth in sales of around 20% for this year, mainly due to the rise in prices along a supply chain (in turn caused by the reduction in warehouse levels). Other driving forces will be the gradual recovery of smartphone application and PCs and, above all, the strong demand for processors for artificial intelligence.
So far we are at the promises, but a confirmation of the recovery is contained in the numbers of Semiconductor Industry Association on last February: sales reached 46.2 billion dollars, growing by 16.3% compared to the second month of 2023. In Europe, however, in February sales were still down 3.4% per year on year.
Based on recent estimates of Fortune Business Insight, the market will grow at a CAGR of 12.2% between 2022, the year in which it was worth 573.44 billion dollars, to 2029, when it will exceed 1,380 billion. The research company cites, among the driving factors of the market, the growing demand for silicon components for a wide range of devices, from smartphones (with demand expected to grow strongly, especially in China), to televisions and household appliances. The growing political and commercial tensions between the United States and China will be reflected in the market scenario, with a foreseeable growth in production in Asia to the detriment of the weight of North American factories. L’Europe, also with the boost of funding from the Chips Act, aims to increase production volumes and research & development activities between now and the end of the decade, but will hardly be able to fit into the US-China duopoly. Analysts predict, however, moderate growth in the chip market for Europe fueled by the automotive and telecommunications sectors.
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Coming back to the present, how are the main players in this market performing? In the last year, it has certainly been the great protagonist of the news and of the financial markets Nvidia, which not only entered the club of “trillion dollar companies” (companies with over a trillion dollars in capitalization value) but which in just a few months doubled its value, exceeding the threshold of 2,000 billion last February. In fiscal 2024, which ended Jan. 28, Nvidia earned $60.9 billion in revenue, an increase of 126% over the previous fiscal year.
The progress of Arm, closely linked to the smartphone market, is less surprising but still positive. The company expects revenues of between 3.8 and 4.1 billion dollars for the entire fiscal year ending March 31st: the value in the middle of the range, 3.95 billion, is slightly lower than analysts’ estimates (3 .99 billion). In the fourth quarter there was a clear recovery, also due to some activated licensing contracts: revenues reached 928 million, with a growth of 47% year on year and a figure well above analysts’ expectations (875.6 millions). The company currently has a valuation of around $100 billion, meaning it has doubled the value of its shares since its debut on the stock exchange last September.
On the good progress of Samsung The memories, in particular the High Bandwidth Memory (Hbm) intended for generative AI applications, are especially affected: this year the company aims to triple the supplies of these components. The Hbm sector is substantially dominated by Samsung and SK Hynix, both South Korean, which compete for supply contracts with large customers such as Nvidia and AMD.
Speaking of Amd, the company has forecasted the sale of around 4 billion dollars of artificial intelligence chips this year (such as the MI300X accelerators, launched at the end of 2023), a value that exceeds the previous estimate by around half a billion dollars. from the company but it is lower than analysts’ expectations. At the end of April AMD closed the first quarter of the new fiscal year with 5.47 billion dollars in revenues, an increase of 2% year on year, while the 188 million dollars in net profit marked a growth of 188% on the “ red” from the previous year. The driving force was mainly sales of premium components for servers and PCs, while sales of gaming products and embedded systems fell.
The Italian-French StMicroelectronics however, it is affected by a drop in demand for semiconductors for the automotive and industrial sectors. The first quarter of the fiscal year ended with a decline in turnover (-18.4% year on year), operating margin (going from 28.3% to 15.9%) and net profit.
Another major player in the sector, Taiwan Semiconductor Manufacturing Co. (Tsmc), three weeks ago reported good numbers for the first quarter of the fiscal year, ended March 31: almost 18.9 billion dollars in revenues, up 16.5% year on year, and improved net profit of ‘8.9%. The quarter-on-quarter trend, however, shows a decline of 5.3% in revenues and 5.5% in net profit. The seasonality of the smartphone market has a negative impact on these numbers, the company explained, but is positively balanced by the growth in demand for components for High Performance Computing (HPC).
The indiscretion of the is fresh Wall Street Journal according to which Apple would have involved Tsmc in the design and production of chips intended for servers. Known internally as “Projet Acdc” (acronym for Apple Chips in Data Centers), the initiative has been underway for years.
