Semicon West in July coincides with many analysts’ mid-year forecasts. The SEMI Market Symposium has long been a show staple, kicking off the week and sometimes setting the temperature for the show, and the industry for the remainder of the year. This year, analysts maintain that we are still on the path to a trillion dollars.
In 2023 the chip side of the business was under pressure due to an oversupply of memory, compute, and server chips, due to a slow PC and mobile market, while the automotive and the industrial part of the business was enjoying the afterglow of the pandemic shortages.
The memory and logic side of the industry pulled out of the nosedive in the second half of 2023, supported by the start of the artificial intelligence (AI) surge, and a refresh cycle for PCs. The memory side of the business also worked hard at managing inventories and the supply and demand of DRAM and NAND, which enabled them to raise pricing, which is a big part of the revenue improvement in 2024, with the exception of high bandwidth memory bit growth have been tepid. In 2024, AI and a PC refresh are driving the cycle, with mobile lagging. Automotive, industrial, and IoT segments have also slowed due to the economy.
Semiconductor Equipment Forecast
While the chip side of the industry saw a 12% decline in 2023 according to SEMI, the equipment segments remained surprisingly strong, with only a 1% decline from 2022. This is atypical as the equipment market usually suffers more when the chip market goes into a downturn (Figure 1).
A significant amount of the equipment growth was driven by China and non-leading-edge manufacturing. China’s wafer fab equipment (WFE) spend accounted for 32% of the top 5 semi-equipment company’s revenues in 2023 and appears to be on track for an even bigger year in 2024. The spending in China and trailing edge kept the equipment industry in better shape than usual during a chip downturn (Figure 1)
Do Pundits Predict a Trillion Dollars?
What did the pundits say about 2024 and beyond? The recent tech sell-off in the stock market gives some idea of what the bulls and the bears were thinking. But we are also at the beginning of an upcycle, albeit an uneven start, but historically memory starts the downturns and starts the upswings.
Marco Chisari, EVP, head of SSIC, and head of U.S. Foundry kicked off the market trends discussion by highlighting that AI is powering the next wave of semiconductors. And while he didn’t say it, due to high bandwidth memory (HBM) growth it is a good time to be a memory company. The memory wall is a key parameter in the rising energy costs for hyperscale computing. Improving the interconnects between memory and logic can alleviate some of the power consumption, but not all. He proposed that a change in architecture is needed to further reduce the rising power consumption. Chisari set the stage for the analysts to discuss their forecasts for the foreseeable future.
Charles Shi of Needham and Company kicked off the forecasting portion of the day. He thinks $1 trillion in 2030 is very doable. If 2025 semiconductor revenue is $800 million in 2025 then only a 4% CAGR is needed to reach the $1 trillion mark in 2030. Shi predicts 28% growth in 2024, while the WSTS in their spring forecast projects 16% growth in 2024. Gartner and IDC are projecting 19 % and 21% respectively. Shi sees AI playing a major role in Needham’s growth predictions. Shi also predicted that WFE intensity would start to decline in 2024 (Figure 2).
This would suggest that patterning costs will decline, as the industry moves to smaller geometries. With fabs increasing their purchases of EUV and then Hi-NA EUV, eliminating double patterning would reduce costs, but only if the throughput of the Hi-NA EUV machines can match that of the EUV systems. With the Hi-NA tools just emerging on the market, it will take some time for these systems to come up to speed and match the existing systems throughput.
SEMI’s numbers show a quarterly decline in capital intensity. This matches the slowdown in EUV systems sold over the past several quarters, as TSMC, memory companies, and Intel start to ramp production. It’s possible there will be an increase in the capital intensity as EUV sales pick up again. To a certain extent, it is a bit too early to call until we get through the 18A build-out.
Gartner and IDC’s semiconductor outlook was somewhat similar with Needham being more aggressive in 2024 based on their AI assumptions. It will be interesting to see how long AI will continue to be a big market driver as Wall Street is starting to question the investment versus revenue equation. Although Q2 calendar year earnings reports have capex for AI hardware growing significantly in 2024, which will continue to fuel fab and packaging capex (Figure 3).
The analyst’s consensus at SEMICON is that WFE in 2024 will be flat and grow by greater than 10% in 2025. Needham does not appear to include packaging and test in its forecast, while SEMI includes both packaging and test, and Gartner includes packaging. SEMI is also forecasting that there are 70 fabs to be built in 2023-2025 and that the industry will add a capacity of 8.7 million 200 mm eq. wafers per month in 2024-2027. China accounts for 4.4 million of those wafers per month. Since the majority of those wafers will be 300mm, the number of new wafers added is closer to 4.3 million wafers per month (Figure 4).
These numbers suggest that WFE will be running over $100 billion for many years to come. In the near term, WFE is expected to grow after a flat 2024 through 2026. SEMI and Gartner predict a decline in 2027 as the world absorbs the added capacity. The current forecast is predicated on the strong AI growth continuing for several years, and China continuing its semiconductor build-up. So if the assumptions are correct and both AI and China continue to ramp, then a trillion-dollar semiconductor industry is still in sight.
