Continued and meteoric sales growth in the semiconductor world could hit a wall in 2024, an industry research firm has predicted.

IC Insights forecasts sustained semiconductor revenue growth in 2022 and 2023, with a market correction expected the following year.

“2024 is currently expected to be the next cyclical downturn in the market, and 2025-2026 will be back to the growth years,” said Brian Matas, vice president of market research. The register.

The semiconductor industry is highly volatile, with up cycles in which demand for chips exceeds supply – as we are seeing right now – followed by down cycles resulting in excess supply.

Companies adjust manufacturing to make more in-demand chips, but that ends up flooding the market with more semiconductors than it needs. Factories slow production or readjust capacity until excess chip inventory is eliminated, which then resets the market for another growth cycle.

The chip industry was caught off guard during the pandemic as demand for chips exploded; working from home has spurred demand for personal devices and data centers have been upgraded to handle cloud-based communication and collaboration platforms. This coincided with the electrification of cars, which spurred demand for inexpensive sensors and chips like power management ICs.

Cracks are already forming in the semiconductor industry, with the 28nm manufacturing node facing a potential oversupply situation next year as new factories come on stream.

IC Insights estimates that semiconductor sales will reach a record $680.6 billion in 2022, growing 11% from 2021. This is a more realistic trajectory than the 25% growth in 2020 compared to to 2019.

The three-year rise from 2020 to 2022 will be the first streak of double-digit growth for the sector since 1993 to 1995, IC Insights said. The 1990s footage was driven by shipments of PCs and electronic devices such as DVD players. The analyst house predicts a more realistic compound growth rate of 7.1% through 2026, with 2024 being the down year.

IC Insights predicted a compound growth rate of 12.3% through 2026 for sensors and actuators used in cars, wireless equipment, wearables and other electronic devices. DRAMs and storage ICs, which are the most important in terms of revenue, will increase by 6.8%.

“Cloud computing, artificial intelligence, machine learning, robotics, automotive electronics, industrial control and automation will be growth drivers even as mature markets like smartphones and personal computing platforms are still progressing,” commented Matas.

In the long term, demand for semiconductors will only increase, although managing the ups and downs along the way makes it difficult to gauge demand and investment. While prediction is a flawed art, 2023/4 appears to be a tough year for the industry. ®