(Bloomberg) -- The global chip industry is poised for a significant rebound this year with sales expected to jump to a record level, fueled by a greater need for the electrical components from a broad range of businesses, according to a forecast from the Semiconductor Industry Association (SIA).
Worldwide sales declined 8.2% to $526.8 billion in 2023, although the fall was mitigated by improving conditions in the second half of the year, the association said Monday in a statement. The increasing momentum indicates sales will gain 13% this year to almost $600 billion, the SIA said.
“Global semiconductor sales were sluggish early in 2023 but rebounded strongly during the second half of the year, a trend we expect to continue in 2024,” said John Neuffer, SIA president and chief executive officer. “With chips playing a larger and more important role in countless products the world depends on, the long-term outlook for the semiconductor market is extremely strong.”
At the heart of the industry’s growth is Nvidia Corporation, the most valuable chipmaker, which avoided the downturn with its market-leading artificial intelligence accelerators. Those chips are in high demand because they can handle the huge amounts of data that companies need to develop AI models. Nvidia’s sales are projected to more than double to almost $60 billion in the fiscal year that ended last month. Analysts’ project the company’s annual revenue will top $90 billion by January 2025.
Investors are looking at the promise of future growth, particularly at chipmakers like Nvidia that they think will benefit from the boom in AI-related hardware spending. The Philadelphia Stock Exchange Semiconductor Index, which rallied 65% in 2023, was up 3.9% this year through Friday’s close.
Still, some of the industry’s largest companies had a difficult 2023 and posted steep declines in sales as customers cut back on orders while working through bloated inventory stockpiles. A few members of that group, including Intel and Qualcomm, are saying that markets are returning to normal buying patterns and the worst of the contractions are over.
According to Neuffer, the weak first half of 2023 was a “hangover” from the pandemic, when electronics makers struggled to get enough supply and faced unprecedented demand. That provoked many customers to order too much and find themselves caught in a glut when the economy returned to normal and purchases of devices such as personal computers slowed.
By region, Europe was the only area that posted growth last year. Sales increased 4%. China and the Asia Pacific region posted the steepest declines. China revenue, the biggest block of sales for the industry, was down 14%. In the Americas, the market contracted 5.2%.