Semiconductors are ubiquitous in electronic devices, microprocessor chips, transistors, diodes and integrated circuits. Anything that is computerized or uses radio waves needs semiconductors. A majority of these semiconductor chips and transistors are made of silicon. This is why you hear the terms ‘Silicon Valley’ and silicon economy so often. Silicon and semiconductors are at the heart of our digital economy. The semiconductor market is set for further growth fueled by a demand wave of new technology trends such as artificial intelligence.
It is predicted that demand for chips will rise in response to the growing use of AI across sectors. Each decade has witnessed a fresh rise in demand in the semiconductor industry led by disruptive tech trends. From 1997-2007 it was the rise in the use of personal computers that boosted the production of central processing units ,memory chips etc. At the same time, the proliferation of the Internet drove the sales for Ethernet equipment, ASICs and network processors and the smartphone revolution led to a demand surge for mobile processors. The next wave of demand was led by cloud computing that needed significant server CPUs and storage.
Market pundits have predicted that artificial intelligence is the new catalyst for growth that will drive another demand cycle for the semiconductor sector. Industry exports believe and predict that the AI-related semiconductor market is expected to grow from US6$bn to more than US$30bn by 2022 owing to AI-driven use cases and wider adoption of machine learning technology. This is at a compound annual growth rate of nearly 50%.
There are seven component types that make up the semiconductor market share. These include memory, logic, microcomponent, analog, optoelectronic, discrete and sensor. Memory products typically command the largest share of revenues. The next largest chunk of the overall pie is driven by sale of logic and microcomponent chips.
There is high demand for chips as a direct result of the growing use of AI globally. A large part of this requirement is stemming from the automotive and industrial markets, which are two of the most rapidly growing sectors.
The following are some of the new emerging opportunities for the semiconductor market:
- Autonomous vehicles
- 5G technologies
- Consumer electronics
- Servers and storage devices
While the market for personal computers will decline through the next decade, the decline will be offset by growth in other tech like the Internet of Things, Machine Learning (ML) and the use of AI in servers and data centers.
Semiconductor Market Forecast 2020
Having said that, the semiconductor market is bound to be impacted by COVID-19 much like other sectors. The visibility for chipmakers and equipment suppliers is limited because of ongoing supply chain issues and end-demand concerns. It is believed that the near-term and mid-term impact of the pandemic will be significant, possibly leading to a downside pressure for the chip industry in 2020.
Conclusion
The wider outlook for the future of the semiconductor industry seems to be positive because of new disruptive technology like AI and its broad application across sectors. The impact of COVID-19 may cause a slowdown in the nearer term.
