AI, auto, industrial markets spurred chip demand rebound in H2-2023

Semiconductors are the key enabling technology that helps promote innovation in a broad range of products across virtually all segments of our economy. After reaching a record total of $574.1 billion in chip sales in 2022, the chip industry experienced an 8.2% decline in global revenue to $526.9 billion in 2023 due to normal market cyclicality. By the second half of last year, however, the industry experienced consistent month-to-month and year-to-year increases in sales, signaling the start of the current cycle.

Fueling the rebound in the second half of last year were increased sales to the automotive and industrial sectors, and the growing demand for a range of chips that are critical to AI systems. The increased sales to these sectors resulted in shifts to end markets’ share of global sales revenue. Newly released data on 2023 semiconductor sales by broad product category, known as “end use,” reveal which markets saw the largest sales increases.

Historically, the PC/computer and communication end markets have accounted for approximately two-thirds of overall sales, with sectors such as automotive, industrial, and consumer electronics accounting for the remainder. But the breakdown of sales by end market have shifted in recent years, and that trend continued in 2023. 

According to the 2023 Semiconductor End-Use Survey from the World Semiconductor Trade Statistics (WSTS) organization, the PC/computer and communication end markets still accounted for the largest share of semiconductor sales in 2023. Sales to the communications industry, however, increased by 2 percentage points while the PC/computer decreased to 25% of sales. Meanwhile, the automotive sector experienced the largest growth in share of chip sales to become the third-largest end market in 2023.

The table above presents the change in market share.

The automotive industry will continue to be an important sector propelling semiconductor demand through the decade. Innovation in vehicle electrification, autonomy, and connectivity requires greater chip content in vehicles. The current generation of cars, including EVs, can have between 1,000-3,500 semiconductors. This number is expected to grow as consumers continue to prioritize advancements in vehicle safety systems (like advanced driver assistance systems or ADAS), vehicle connectivity, and electrification when choosing a car.

Despite the downturn in the global semiconductor market in 2023, demand for chips in the long-term is expected to show vibrant growth. In fact, WSTS projects double-digit annual market growth in 2024. To meet this growing demand, our industry has recently committed to expanding manufacturing capacity in the US through private investments of over $250 billion thus far.

--  Robert Casanova, Director, Industry Statistics and Economic Policy, SIA.