On June 4, 2024, WSTS (Global Semiconductor Market Statistics) released its forecast for the global semiconductor market size in 2024 and 2025. In the previous forecast (November 2023), the growth rate in 2024 was expected to increase by 13.1% year-on-year, but this time it has been raised to 16.0% year-on-year. From the perspective of the semiconductor market, as of April 2024, shipments have increased by 15.2% year-on-year, showing a recovery trend.

The upward revision of the forecast can be said to be a convincing move. It is expected to grow by 12.5% by 2025, maintaining double-digit growth for 2 consecutive years. But I think that under certain conditions, there may be more bullish forecasts. What are these conditions? In this article, the author will look at the prospects of the future semiconductor market based on the situation so far.

01 Negative growth forecast for 2024

Discrete devices/optical semiconductors/sensors

WSTS divides the semiconductor market into four product categories: discrete devices, optical semiconductors, sensors/actuators, and ICs, and publishes market size results and forecasts for each product. Let's take a look at the forecasts for each.

Global semiconductor market size trends and forecasts

Source: WSTS 2024 Spring Semiconductor Market Forecast

For discretes, the forecast is for a 7.8% year-over-year decline in growth in 2024; actual results from January to April 2024 show a 13.9% year-over-year decline, which seems to be a slightly bullish forecast. As of April, the small-signal transistor market was down 16.8% year-over-year, and the power transistor market was down 14.1% year-over-year, both showing double-digit negative growth. The small-signal transistor market has been in negative growth since September 2022 and has not recovered yet.

The power transistor market has been performing well, but has been in negative growth since January 2024. Power transistors are critical to vehicle electrification, but demand for power transistors has stagnated due to over-ordering in the automotive industry and may continue to be sluggish in 2024. Double-digit negative growth in the discrete device market may be inevitable in 2024, and the forecast for 2025 is a 7.7% year-over-year increase, but this number is not surprising because it can be predicted that demand from vehicle electrification will develop steadily.

Optical semiconductors are expected to decline 1.0% year-on-year, with results for the January-April 2024 period forecast to be down 5.2% year-on-year. Image sensors account for about half of this market, with results up 11.7% year-on-year through April. Positive growth is expected in 2024 given the current trend of firm smartphone demand. The forecast for 2025 is for 3.5% year-on-year growth, but the outlook will change significantly depending on how the number of image sensors installed per smartphone changes, so it is worth keeping an eye on this trend.

The Sensor & Actuator forecast is down 7.4% year-over-year, and from January to April 2024, the forecast is down 12.9% year-over-year, and has been negative since January 2023. While automotive demand is good, it can be inferred that it has not made up for the stagnation of smartphone demand, which is currently strong and automotive demand is stagnant. I agree with the forecast of single-digit negative growth in 2024. The WSTS forecast for 2025 is 6.3% year-over-year growth, and if smartphone demand recovers, it is expected to achieve higher growth, but we'd better not be too optimistic.

02 Analog chip market remains sluggish

Microcontroller/Logic Chips on the Rise

ICs are divided into "analog chips", "microcontrollers", "logic chips" and "memory".

Global IC market size and forecast

Source: WSTS 2024 Spring Semiconductor Market Forecast

The analog chip market is expected to decline by 2.7% year-on-year. Judging from the results from January to April 2024, it seems that the bottom period has been overcome, although progress is slow, so it can be said that this is a reasonable forecast. The impact of over-ordering in the general analog market still exists, and the year-on-year decline continues to exceed 20%. The key is whether the impact of over-ordering in the general analog market can end in the second half of 2024.

In specific application areas, demand for smartphones is recovering, which has also driven the development of the entire analog market, and it is expected to grow by 6.7% by 2025. If demand for smartphones continues to remain strong, this goal should be achievable. However, if 5G (fifth generation mobile communication) services are delayed (in countries such as Japan), there are concerns that demand will stagnate again.

The microcontroller market is expected to grow by 1.6% year-on-year. Judging from the actual results from January to April 2024, the market grew by 10.6% year-on-year and remained stable, so the WSTS forecast appears quite conservative. Among them, MPU, which accounts for about 60% of the microcontroller market, performed well, with a year-on-year growth of 34.5% as of April, confirming that personal computer demand is on the road to recovery. Currently, the MPU market is also strong, but this is due to the decline in PC inventory, and the PC market itself is not strong, so we should not be too optimistic.

The question is how long the strong performance of MPUs can continue and when the stagnant MCU demand can recover. We hope to see an increase in demand for MPUs in servers, but it is important to note that Intel and AMD are developing MPU solutions for servers, and Nvidia is developing logic solutions. This is just a matter of device definition, but if Nvidia continues to expand its server market share, the MPU market itself may shrink.

The logic chip market is expected to grow 10.7% year-on-year. Looking at the performance from January to April 2024, the year-on-year growth is 14.2%, and this solid trend is likely to exceed the WSTS forecast. Telecom equipment, which accounts for a large proportion of logic chips, performed very well, with a year-on-year growth of 19.0% as of April. The market for application processors installed in smartphones grew 8.4% year-on-year and is moving towards a reasonable level, but the key point will be whether (Japan and other countries) will launch 5G services in the future. 2025 is expected to grow 10.4% year-on-year, which may be greatly affected by the launch of 5G services.

03 The storage market is recovering

The storage market is expected to grow by 76.8% year-on-year. Judging from the performance from January to April 2024, it seems to have performed very well, with a year-on-year growth of 85.4%. However, this growth rate is largely due to the fact that the same period last year (2023) was the bottom of storage, mainly due to the rebound of storage. It is undoubtedly in a recovery trend, but it has not recovered to a sufficient level compared with the previous peak. Therefore, the forecast of WSTS is reasonable.

The average unit price of DRAM and NAND flash memory has been rising moderately, indicating that the supply and demand balance is stable, but the situation of DRAM and NAND flash memory seems to be slightly different. As for DRAM, the demand for HBM (high bandwidth memory) for AI processors is growing, and there is a trend to accelerate capital investment for mass production of DRAM. Taking NAND flash memory as an example, various manufacturers control the supply and demand balance while adjusting production, and there is no trend to strengthen capital investment. In other words, the DRAM market seems to have room for growth in the future, but the difference is that the NAND flash memory market may not have the same expectations. It is said that Kioxia, a professional manufacturer of NAND flash memory, hopes to go public at the end of 2024, but how far the future NAND flash memory market can go, we will wait and see.

The memory market is expected to grow by 25.2% in 2025, a number that I think is open to debate. So far, the memory market has peaked in 2017 and 2021, and if this pattern repeats, the next peak is expected to occur in 2025. In other words, I think we can expect a higher growth rate. People have high hopes for growth in data center demand, but the key lies in the extent to which the PC and smartphone markets can grow.

04 Conclusion

In summary, while I generally agree with WSTS's forecast of 16.0% growth in 2024, I think we should look more closely at the forecast for the discrete device market, while the forecast for the microcontroller https://easelinkelec.com/MemoryX2H.htmland logic chip markets should be more optimistic. Starting in early 2024, the major semiconductor application markets are changing, such as the sluggish demand for semiconductors in PCs and smartphones is beginning to recover, while the previously strong demand for automotive semiconductors is stagnant.

In the automotive market, the demand outlook for electric vehicles (EVs) has been revised down, but overall automotive demand has not been revised down. Starting in early 2021, the automotive semiconductor shortage that lasted for more than two years disrupted the market, creating a scramble for semiconductor products and resulting in a chip surplus. Starting in early 2024, the slowdown in automotive semiconductor demand is likely due to inventory adjustments caused by overordering, and this situation is likely to continue until the end of the year.

On the other hand, the demand for semiconductors in PCs and smartphones was sluggish due to inventory accumulation caused by the economic recession in 2023, but starting in early 2024, this situation has improved and demand for semiconductors is recovering. Since all of these applications are major drivers of semiconductor demand, it is important to understand how these market trends will evolve.

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