Despite short-term challenges, semiconductor industry poised for growth in 2024

Good news seems to be a bit thin on the ground this year, and the analyst company Gartner hasn’t changed that with its latest forecast. The company said that semiconductor revenues, which totalled $599.6 billion in 2022, will fall 11.2% this year to $532 billion. While more uncertain, things could pick up again in 2024, Gartner predicts growth of 18.5% to $630.9 billion.

In 2022, it was evident consumer demand was already low as growth was recorded at just 0.2%. This year, businesses are also losing interest in buying electronics due to the poor economic outlook. On top of these issues, there’s an oversupply of chips in inventories which is pushing prices down. Eventually, the inventories will run down and more purchases will have to be made.

Unsurprisingly, after the work-from-home period during the pandemic, the PC, tablet and smartphone semiconductor markets are stagnating. These represent 31% of semiconductor revenue in 2023, luckily, there are other areas where demand is higher. In the automotive and industrial, military/civil aerospace semiconductor markets there is expected to be growth of 13.8% to $76.9 billion this year.

In the future, Gartner believes we’ll see smaller end markets that could make demand for semiconductors a bit more steady. These future end markets include automotive, industrial, IoT, and military/aerospace. Commenting on the more diverse markets, Richard Gordon, Practice Vice President at Gartner, said:

“End-market demand will be less exposed to consumer discretionary spending and more exposed to business capital spending. Supply chains will be more complex with many more intermediaries involved and varied channels to market, and to satisfy different end-market requirements, different types of capacity will be required.”

One area significantly hurting semiconductor demand is the memory industry. That market is expected to see revenues decline by 35.5% this year. The issue with this market is that inventories are full, with weakening consumer demand. Oversupplies mean falling prices which will help them sell but it will take time. Next year, Gartner says there will be a 70% growth in memory revenue.

Despite short-term challenges, semiconductor industry poised for growth in 2024