Chip Industry Projected to Grow 13% in 2024, According to Deloitte Insights

After a challenging year in 2023, where sales in the semiconductor industry fell 9.4% to $520 billion, Deloitte forecasts a strong recovery with expectations of 13% growth, bringing total sales to $588 billion in 2024.

The semiconductor sector is notoriously cyclical, making accurate predictions difficult. However, Deloitte's latest global semiconductor industry outlook suggests a comeback is imminent in 2024.

Several factors contribute to this optimistic forecast. Although 2023 was tough, the memory chip market, a key driver, is anticipated to recover, potentially returning to 2022 sales levels. The stock market's positive response, with the top 10 global chip companies' combined market capitalization reaching $3.4 trillion by mid-December 2023, signals confidence in the recovery.

End markets for PCs and smartphones, both of which declined in 2023, are projected to see a 4% rebound in 2024. This growth is essential for the semiconductor industry, as communication and computer chip sales accounted for 56% of total sales in 2022.

Deloitte's report examines critical indicators of industry health, such as inventories and fab utilization. Although high inventories exceeding $60 billion could hinder sales in the first half of 2024, the overall trend remains positive. Nevertheless, the industry's need for increased utilization—expected to dip below 70% in Q4 2023—suggests that achieving profitability may take time.

Five Pivotal Points

The executive summary outlines five critical areas for the semiconductor industry in 2024:

1. Generative AI Accelerator Chips: Anticipated to exceed $50 billion in sales, these chips will make up roughly 8.5% of total sales. However, their lower production volumes may affect overall manufacturing capacity and industry utilization.

2. Smart Manufacturing Trends: Deloitte explores the adoption of generative AI in smart manufacturing, highlighting the evolving landscape of semiconductor production.

3. Global Assembly and Test Capacity: The report emphasizes the industry's growing need for enhanced global assembly and test capacity as a cornerstone for future growth.

4. Intellectual Property Security: The semiconductor industry's intellectual property is increasingly targeted by cyberattacks, representing a significant threat to the sector.

5. Geopolitical Implications: Deloitte examines how export controls on advanced manufacturing equipment and technologies impact the industry amid a complex geopolitical landscape.

In conclusion, while Deloitte recognizes a promising trajectory for the semiconductor industry in 2024, it stresses the importance of addressing strategic challenges linked to geopolitical tensions and intellectual property security risks.