Global Semiconductors Market Overview, 2024-29

Market Dynamic

Market Drivers

• Emerging technologies - 5G, AI, and IoT: The rapid expansion and acceptance of emerging technologies such as 5G, AI, and the Internet of Things (IoT) are major drivers of the worldwide semiconductor market. The introduction of 5G networks necessitates innovative semiconductor technologies that can support increasing data speeds, reduced latency, and connections across a wide range of devices. Similarly, the expansion of AI applications necessitates the use of specialized semiconductor circuits capable of efficiently processing massive amounts of data. The Internet of Things (IoT), with its networked gadgets and sensors, relies largely on semiconductors for flawless communication and data processing. The surge in demand for these transformational technologies fuels continued semiconductor innovation and manufacture.

• Automotive industry evolution and electric vehicles (EVs): The revolution of the automobile industry, fueled by the shift to electric vehicles (EVs) and enhanced connectivity, is a significant market driver for the semiconductor industry. Modern vehicles rely more on semiconductor components for advanced driver assistance systems (ADAS), infotainment systems, and electric powertrains. As the automobile industry accelerates its transition to electric and self-driving vehicles, demand for specialized semiconductors for sensors, processors, and communication modules grows. Semiconductors play an important role in improving safety, efficiency, and user experience in next-generation vehicles, making the automotive industry a vital driver of innovation and demand in semiconductor markets.

Market Challenges

• Geopolitical uncertainties and trade rigidities: The semiconductor business is heavily influenced by geopolitical dynamics and trade conflicts among major nations. Strained relations between countries, such as the United States and China, can cause disruptions in the flow of technology, materials, and intellectual property. Trade restrictions and tariffs can have an impact on manufacturing costs and semiconductor firm’s competitiveness. The sector must approach these geopolitical concerns strategically, taking into account the implications of regulations for global supply chains, market access, and the ability to collaborate on R&D.

• Environmental sustainability pressures: The semiconductor industry is under increased scrutiny and pressure to address environmental sustainability issues. The manufacturing procedures involved in semiconductor manufacture frequently require high energy consumption and the use of hazardous materials. As environmental awareness grows worldwide, semiconductor businesses face increasing pressure to develop cleaner and more sustainable manufacturing techniques. This includes creating and deploying solutions that reduce carbon footprints, conserve water, and restrict the use of hazardous chemicals. Achieving sustainability goals while remaining competitive and technologically advanced presents a unique challenge for semiconductor producers.

Market Trends

• AI and edge computing integration: In recent years, one notable trend in the global semiconductor market has been the increasing integration of artificial intelligence (AI) capabilities into semiconductor devices. The demand for AI-powered applications, ranging from self-driving cars to smart home devices, has prompted semiconductor manufacturers to create specific chips suited for machine learning and neural network processing. This trend is strongly related to the growth of edge computing, in which processing takes place closer to the data source rather than depending only on centralized cloud servers. Semiconductor manufacturers are developing processors with greater AI capabilities to match the computing demands of edge devices, allowing for faster decision-making and less reliance on continual internet connectivity.

• Automotive semiconductor boom: The automobile industry has emerged as a big driver of semiconductor demand, indicating a new trend in the market. The increased integration of modern technology inside automobiles, such as sensors, communication solutions, and advanced driver assistance systems (ADAS), has resulted in unprecedented demand for automotive semiconductors. The switch to electric vehicles (EVs) has accelerated this trend, necessitating specialized semiconductors for power management, battery control, and electric drivetrain components. The automotive semiconductor industry is expanding rapidly as both traditional automakers and new EV companies seek cutting-edge semiconductor solutions to improve vehicle performance, safety, and connection.

Covid-19 Impacts

The COVID-19 pandemic had a significant influence on the worldwide semiconductor industry, disrupting the supply chain and changing market dynamics. Factory closures, workforce difficulties, and international trade and travel restrictions all contributed to a slowdown in semiconductor output. Simultaneously, increased demand for electronics, remote work technology, and healthcare-related gadgets caused a supply-demand imbalance. The automotive industry, a key consumer of semiconductors, experienced manufacturing delays as a result of chip shortages. As a result, semiconductor makers and their clients had to adjust to a fast shifting landscape, emphasizing the importance of resilient supply chains, intelligent inventory management, and improved collaboration in navigating the pandemic's uncertainties.

Key Development

• The Indian government has recently announced to boost its manufacturing capacity for semiconductors. The government has also launched a program ‘Semicon’ to promote the production of semiconductors in the country with an outlay of Rs.76,000 crore.

• The CHIPS Act 2022 by the United States government includes $52 billion for chip manufacturing, the act also offers incentives and tax credit for semiconductor manufacturing companies. The element under this act is supposed to support the production and manufacturing of semiconductor chips by strengthening the nation’s semiconductor market.

• According to the Semiconductor Industry Association, the United States exported $61.1 billion in semiconductors in 2022.

• Intel, one of the most prominent manufacturers of semiconductor chips stated in January 2023 that it has invested $20 billion in two new semiconductor chips factories in Ohio.

• In 2022, China established total 433 new companies for chip design and production. The total sales of Chinese semiconductor companies increased to $573 billion.

• In March 2023, the United States exported semiconductor devices to Mexico worth 125 million.

• The Canadian government has planned to spend $181.94 million on the country’s domestic semiconductor production industry.