In recent years, the shifting landscape of international competition has forced China’s semiconductor industry to move forward under challenging conditions. With the strong support of national policies and industry capital, after years of accumulation and development, China’s semiconductor industry has produced a significant number of leading companies in various segments such as design, EDA, IP, packaging and testing, and manufacturing. However, it remains weak in a few key areas.
1. Global Semiconductor Competition Accelerates Regional Restructuring
In 2023, chip legislation in various countries attracted the attention of enterprises. Despite facing cyclical industry pressures, many companies actively discussed expansion. However, as companies comprehensively evaluated government policies and compliance requirements, they became more aware of the limitations of government support, thus dampening their enthusiasm for capital expenditure.
In addition to supply-side factors, the rapid growth on the demand side is another factor affecting evaluations of overcapacity issues. Increasingly, semiconductor industry leaders believe that with the rise in demand for generative AI, cloud computing, data centers, and automotive semiconductors, the industry’s demand will experience breakthrough growth in the future.
The global semiconductor market is expected to grow from $600 billion in 2021 to $1 trillion by 2030. Therefore, the Global Semiconductor Alliance research suggests that in 2024, the percentage of respondents who believe there will be no overcapacity in semiconductors will increase by 10% compared to 2023. Additionally, 70% of respondents expect significant improvement in industry operating profit growth in 2024.
Regarding whether effective implementation of semiconductor industry policies in the US, Europe, and Japan will cause overcapacity risks, various studies suggest that this risk may exist in the future but will not be evenly distributed. Currently, national semiconductor industry policies are accelerating the formation of regional supply chains globally.
Therefore, the potential risk of overcapacity will also be regional rather than global. In this scenario, the only certainty is that countries and regions with large market plans and manufacturing demands will not only have lower overcapacity risks but also stronger capacity adjustment and absorption capabilities.
2. Semiconductor Market Will Reach $5 Trillion
Speaking at the 2024 Southeast Asia Semiconductor Exhibition in Kuala Lumpur yesterday, it was emphasized that the global semiconductor industry is growing rapidly, riding on the wave of three major technological disruptions. By 2030, the industry is expected to reach the milestone market size of $1 trillion.
However, achieving this exponential growth in an era of unprecedented challenges requires unprecedented industry collaboration.
Ajit outlined the three major transformative waves driving the industry: the Internet of Things (IoT), artificial intelligence (AI), and quantum computing. Ajit, who has been the chairman of SEMI (the International Semiconductor Equipment and Materials Association) for seven years, likes to cite an example of the industry’s sales growth rate. “While it took about 50 years for semiconductor sales to reach $500 billion, these three disruptive forces are expected to double that number to over $1 trillion in the next five years,” he said.
“The IoT was the growth driver of the past decade. This decade belongs to AI; what you see today is just the tip of the iceberg, which will drive this growth to $1 trillion,” he confidently predicted.
If that’s not enough to impress you, look at his forecast of quantum computing’s impact on future sales. “I believe quantum computing will arrive within the next decade and will make this industry worth $5 trillion by 2050,” he declared.
This may sound exaggerated, but management consulting firm McKinsey has already predicted that the market will reach $1 trillion by 2030. The growth is mainly driven by the automotive industry, with a compound annual growth rate of 13%-15% from 2021 to 2030, while the computing and data storage industries are growing the slowest, with a compound annual growth rate of 4%-6% from 2021 to 2030.
Related:
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- HBM Sales Skyrocket 330% in Semiconductor Leaders Report
- Future of Semiconductor Industry: Insights Ahead After 2024
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