Semi recovery seen in Q4 with momentum building into 2024

Since early in the Covid pandemic semiconductor sales have gone haywire—at least from a layman’s perspective. At one point in 2021, a global chips shortage roared into place for processors needed for cars, servers and PCs and laptops (remember the boom in home office work?), followed by a quick chip production boost that turned into an oversupply and then an inventory correction where manufacturers cut production.

Now, for the last five quarters, in fact, semiconductor markets have seen year-over-year declines, according to Boris Metodiev, director of market analysis at TechInsights.  However, year-over-year growth is expected to return in the fourth quarter of 2023 as production cuts have “worked there way through the supply chain,” he said in a statement issued by the SEMI industry association on Monday.

SEMI put it a little differently, saying the global chip making industry is “on track for recovery in the fourth quarter…setting the stage for continued growth in 2024.” In fact, many economists have noted the cyclical nature of chip sales globally going back for decades and still envision total annual sales will reach $1 trillion by 2030, up from $574 billion in 2022.  Sales of chips for generative AI are going strong, another reason for long-term optimism.

Also, SEMI said integrated circuit sales are expected to rise 4% in the fourth quarter, compared to third quarter, after improving 7% in third quarter. Electronics sales are predicted to show a “robust” 22% quarter-over-quarter increase in Q4 as well.

Despite all that optimism, SEMI noted that semiconductor manufacturing indicators remain soft. Fab usage rates and capital expenditures have continued to decline in the second half of 2023. Total capital expenditures are hovering at levels of 2020.

However, back-end equipment sales are expected to reach a bottom point in the fourth quarter, added Clark Tseng, senor director of market intelligence at SEMI. “This will mark an important turnaround for the chip manufacturing industry, signaling a recovery from the downturn with building momentum in 2024,” Tseng said in a statement.