In the semiconductor industry, the market pattern has quietly changed

On January 30, 2024, the China Business News reporter learned from the market Research institute Counterpoint Research that in 2023, the global semiconductor industry revenue of 521.3 billion US dollars, a year-on-year decline of 8.8%, while Intel surpassed Samsung to become the world's largest semiconductor chip company.

Data show that in 2023, the revenue of Samsung Electronics' semiconductor chip department fell from $70.2 billion in 2022 to $43.4 billion in 2023, while Intel's semiconductor business declined during the same period, but the decline was smaller, with revenue of $50.5 billion.

The other semiconductor chip companies on Counterpoint Research's list are: Nvidia, Qualcomm, Broadcom, SK Hynix, AMD, Texas Instruments, Infineon and ST. It is worth mentioning that due to the explosion of the AI large model, NVIDIA's performance, which sells shovels next to the AI gold mine, soared, and for the first time ranked among the top three in global semiconductor revenue.

Pattern change

Counterpoint Research data show that in 2023, the revenue of Samsung Electronics' semiconductor chip division fell from $70.2 billion in 2022 to $43.4 billion in 2023, down 38% year-on-year.

In contrast, Intel's revenue fell 16% year-over-year to $50.5 billion, driven by double-digit year-over-year declines in both its PC and server divisions. Although Intel's revenue also declined, but the decline was not as large as Samsung, so it regained the throne of the semiconductor revenue ranking in 2023.

As for the reasons for the large decline in Samsung's semiconductor business, Counterpoint Research believes that it is mainly due to the decline in the memory chip market and Samsung's failure to attract customers in advanced chip manufacturing processes.

Samsung Electronics is the world's largest maker of DRAM (dynamic random access memory), which is widely used in devices such as smartphones and computers. For some time now, the global semiconductor market has experienced a prolonged downward correction, and in the first half of 2023, memory prices continued the downward trend of the second half of 2022, with DRAM prices falling more than 60% from their peak.

The semiconductor division has been a major source of profit for Samsung Electronics, contributing nearly 80 percent of the company's profits at its peak. However, in the context of the bottom of the global semiconductor deep industry, the past year has dragged down performance. Global consumer electronics demand continues to weaken in 2023, with demand for smartphones and memory chips remaining subdued.

Samsung Electronics recently announced the fourth quarter of 2023 financial results show that, affected by the poor performance of the semiconductor sector, Samsung Electronics operating profit declined for the sixth consecutive quarter, and the fourth quarter profit decreased by 35% compared with the same period last year. Operating profit in 2023 was 6.54 trillion won, down 84.92 percent year-on-year.

Other semiconductor chip makers on Counterpoint Research's list include: Nvidia, Qualcomm, Broadcom, SK Hynix, AMD, Texas Instruments, Infineon and ST.

Thanks to the boom in artificial intelligence and surging demand for powerful Gpus for cloud servers, Nvidia is almost alone in the global chip industry in Posting revenue growth. In 2023, Nvidia's revenue soared from $16.3 billion in 2022 to $30.3 billion, an increase of 86%, and its ranking also jumped from tenth to third place in 2022.

Qualcomm ranked fourth, with 2023 revenue of $30.2 billion, down 17% from $36.3 billion in 2022. Broadcom maintained its fifth position with $30 billion in revenue. SK Hynix, Samsung's biggest competitor in the memory chip market, posted revenue of $23.6 billion, down 33 percent from $35 billion in 2022. AMD's revenue edged down 4% from $23.6 billion in 2022 to $22.6 billion in 2023. Texas Instruments ranked seventh, with revenue falling 12% from $20 billion in 2022 to $17.5 billion in 2023.

In fact, in the past year, the global semiconductor industry is still deep bottom, most semiconductor giants have suffered a decline in performance. According to Counterpoint Research, in 2023, global semiconductor industry revenue fell 8.8% year on year to $521.3 billion due to slowing corporate and consumer spending.

This is also supported by relevant data from other institutions. According to market research firm Gartner's preliminary statistics, in 2023, global semiconductor revenue totaled $533 billion, down 11.1% from the same period last year.

Gartner's ranking also shows that in 2023, Intel surpassed Samsung and ranked first. Gartner analyzed that Intel took the top spot because Samsung and SK Hynix were hit by the weakness of memory components.

Expected recovery

But the good news is that the worst is over for the semiconductor industry. The Semiconductor Industry Association (SIA) recently said that semiconductor sales are expected to turn from contraction to growth in 2024, and are expected to grow by 13.1%. The World Semiconductor Trade Statistics Organization (WSTS) not long ago also raised the 2024 global semiconductor market sales forecast, it is expected that 2024 global semiconductor revenue will reach 588.364 billion US dollars, of which memory chip revenue will increase by 44.8%, becoming the main driving force to promote semiconductor revenue growth.

The reporter learned from the semiconductor supply chain that a number of semiconductor chip factories have sent price increase letters to terminal manufacturers, and consumer electronics will enter a new round of price increase cycle. Samsung as early as the third quarter of 2023, that is, the price of DRAM storage, Kai Xia and other products have been price increases.

"The collective production reduction and price increase of the semiconductor industry has a huge impact on the consumer electronics industry, and the demand for automotive electronics is still strong, and it is expected that consumer electronics such as smartphones and computers will enter the price increase cycle in 2024." The supply chain people told reporters.

At present, consumer electronics such as smartphones, laptops and tablets have not completely gone out of the trough, but there has been a recovery momentum, and the AI development boom has also brought new opportunities to memory chip manufacturers. In order to cooperate with AI servers with high computing power requirements, high-density storage (HBM) chips have become the "new darling". It is reported that HBM is a chip that processes data faster, which can speed up the data processing speed of training AI models.

To this end, a number of semiconductor companies are expanding HBM lines and significantly increasing the capacity of HBM production lines. At about five times the price of standard DRAM chips, HBM is highly profitable and is expected to grow from less than 5 percent of global memory revenue today to more than 20 percent by 2026, according to SemiAnalysis, a semiconductor research and consulting firm. It remains to be seen whether high value-added products can bring a rebound in the performance of semiconductor companies.

Despite the sluggish performance of Samsung's semiconductor business in 2023, looking ahead to 2024, the company expects annual operating profit to more than quadruple to 33 trillion won, with annual revenue expected to approach 302.7 trillion won.

The industry believes that with the increasing demand for memory chips, coupled with the price of memory chips rising from 2023, Samsung Electronics' revenue is expected to improve in 2024. That could help the company regain its crown from Intel and once again become the world's largest semiconductor chip company.

At the same time, although there is uncertainty in China's business due to chip limitations, the continuation of the AI wave will continue to push Nvidia's performance and ranking higher. Although Intel's revenue has declined, it has made rapid progress in the foundry business and automotive electronics business in 2023, moved frequently in the field of AI, and is expected to achieve steady growth in 2024.

William Li, senior analyst at Counter point, said: "We believe that AI (AI servers, AI PCS, AI smartphones, etc.) will continue to be the main endogenous growth driver for the semiconductor industry in 2024, along with the rebound in the memory industry due to the normalization of oversupply conditions and the recovery of demand. At the same time, the automotive industry could become another driver of the market, which is already the main revenue driver for Infineon and ST in 2023.

The recovery and performance of various fields of semiconductors remains to be observed, which also means that changes in the global semiconductor industry will continue in the future.