2023 was a challenging year for electronic components and especially for semiconductors, which recorded 9% lower sales than in 2022. In 2024, global sales are expected to rebound by over +10% and revenues should beat the 2022 industry record by about 2%. Volumes should rebound, thanks to strong demand related to emerging technologies such as AI that are fueling the need for increased computing power. The continued rise of electric vehicles should also benefit the sector. Moreover, production and inventories are also normalizing, which should smoothen supply chains through more predictable lead times and prices.
Despite the challenging landscape, the semiconductor sector posted an EBITDA margin of about 30% in 2023. Both revenues and earnings are expected to grow by double-digits in the next five years. The sector also continues to exhibit a strong push for innovation – R&D spending accounted for about 14% of sales.
The ongoing tech cold war between the US and China is a major risk for the industry as China is both a key client and player in the global supply chain of semiconductors. These tensions have led to significant trade restrictions but each regional powerhouse (i.e. China, the US and the EU) has also decided to implement strong policies to foster R&D and domestic manufacturing capacities. For instance, the Chips act in the US has already been driving strong growth in industrial manufacturing. Corporates in the sector can benefit from these policies and their financial incentives. Asia’s dominance in the sector is unlikely to be challenged in the future but Europe and the US could reduce their current over-reliance.
