Semiconductors are the most fundamental products in the modern world, underpinning many of the cutting-edge innovations used globally.
However, the global semiconductor industry underperformed in 2023, with global sales of $526.8bn, 8.2% lower than the previous year. The steep decrease in sales was exacerbated by a volatile memory chip market, which fell significantly compared to logic chip sales.
However, the industry has seen significant growth in 2024, recording sales of $149.9bn in Q2 2024 which is an 18.3% increase year-on-year. The rapid rise in semiconductor sales can be attributed to several factors driving demand across different regions and sectors.
Technological advances across industries are helping revive semiconductor sales
As technology continues to advance at a rapid pace, the demand for semiconductors across various industries is expected to increase. The integration of artificial intelligence, 5G, and the Internet of Things into everyday products is driving the need for more sophisticated and energy-efficient solutions, leading to a surge in demand for new semiconductors. Digital transformation across industries is a significant contributor to the rise in demand.
Industries such as automotive are currently undergoing rapid shifts, increasing their need for semiconductor technology. Implementing advanced driver assistance systems and autonomous driving technologies has meant modern vehicles rely heavily on semiconductors, with companies such as NXP Semiconductors providing solutions for safe automation within vehicles.
North America had the strongest regional performance
Regionally, North America has emerged as a strong performer in the semiconductor market, with a significant increase in sales compared to other regions. This growth can be attributed to the region’s focus on reshoring manufacturing capacity, expanding technological infrastructure, and fostering innovation hubs.
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By GlobalDataMeanwhile, Asian countries, especially China, continue to benefit from their dominance in manufacturing and supply chain capabilities. However, Europe’s decline in sales highlights the need for potential market adjustments and supply chain improvements to remain competitive in the global chip industry.
Europe’s reliance on imported semiconductors and suppliers, paired with its weaker consumer electronics, AI, and cloud computing markets, has meant a slower recovery in semiconductor industry sales. Although there is strong demand for its automotive and aerospace sectors, Europe will need to make several strategic adjustments to ensure it does not fall further behind the global semiconductor market in terms of both manufacturing capacity and innovation.
The semiconductor industry has bolstered its supply chain
Disrupted by the pandemic, the semiconductor industry has prioritised supply chain resilience and strategic investments in manufacturing capabilities. By diversifying production and investing in local chip manufacturing, countries are reducing their reliance on overseas suppliers and strengthening the overall resilience of the semiconductor supply chain.
Regions such as North America and Asia Pacific have taken steps to enhance local semiconductor production capabilities and decrease reliance on overseas suppliers, particularly Chinese companies, such as Huawei and SMIC, which have been stockpiling chip-making equipment to shield themselves from further US export restrictions, with ASML reporting surging sales in China.
This approach, combined with strong market demand, is driving growth in sales and positioning the industry for continued success in powering technological innovation across various sectors.
Overall, the global semiconductor industry is on a trajectory of growth, driven by evolving technology needs, robust regional markets, and strategic investments in manufacturing. As the industry continues to play a critical role in advancing technological innovation, companies and countries alike are positioning themselves to capitalise on the opportunities presented by the increasing demand for semiconductors in the digital age.
