We’re delighted to share the most recent extract from Future Horizons July report. Continuing reading below to uncover more about the current market outlook.
Executive Summary
After last month’s temporary pause, May saw Opto continue on the downward trajectory it started in November 2023, declining 5.7 percent annualised growth vs. May 2023.
Likewise, Discretes saw its annualised growth fall even further to minus 15.3 percent vs. 13.0 percent in April and minus 9.9 percent in March. This broader industry bellwether sector is not yet showing any signs of abatement.
At the same time, ICs, the power force behind the industry’s current revenue growth spurt, saw its sixth consecutive month of strong double-digit monthly annualised growth, up 29.7 percent vs. May 2023, reflecting the impact of the strong rebound in memory. The annualised IC sector growth excluding memory was a more subdued 7.0 percent, down from April 2024’s 10.7 percent number.
Don’t Get Drunk On The Headline Numbers … The Devil’s In The Detail
The overall year-on-year total Semiconductor market grew 22.1 percent, up from the 17.4 percent number of April 2024.
This was the seventh consecutive month of double-digit annualised growth since the market turned positive in September 2023.
As mentioned several times before, nice as they are, it is important not to get drunk on these heady headline numbers, given both the huge impact from memory, the stubbornly weak demand for IC units and the still-declining Analog IC, Discrete and Opto markets.
You cannot have a real and sustainable market recovery whilst these sectors remain weak. Based on current trends, a broader-based industry recovery is unlikely before the first half of 2025.
Unit Sales Lagging
May was the seventh consecutive month where shipments were below the IC usage trend line, confirming our belief that the much-needed unit rebound is still a long way to go. There is now ever-diminishing hope for a second-half year IC unit rebound.
Excess inventory remains the industry’s number one problem, affecting not only unit shipments but capacity utilisation rates as well. Forcing customers to honour the Long-Term Agreements (LTAs) signed in the 2022-23 market boom has clearly frustrated efforts to liquidate stocks and rebalance supply with demand, pushing the unit recovery further down the road.
Market Outlook
The extent of the memory market rebound, following one of the steepest recessions in memory history, is having an immediate impact on the memory firms’ P&L, with Samsung Electronics announcing more than a 15-fold increase in second-quarter operating profit.
Their stronger than expected guidance underscores a boom in data centres and AI development, as big tech companies race to develop their own advanced AI models, sparking demand for cutting-edge DRAM chips such as high-bandwidth memory.
Having cut back costs to the bone, any increase in ASP drops immediately to the bottom line.
The news on the non-memory front, however, remains a much bleaker picture. There is still a long way to go before the broader non-Memory market recovers
Future Horizons will be hosting a IFS 2024 Autumn Update on September 20th 2024. For more information, click here. For any further details, please reach out to the Future Horizons team.
