Source: official account: semiconductor news, content from Economic Information Daily
The new explosive development of artificial intelligence technology is changing the global semiconductor industry landscape. The huge demand for high-performance and high computing chips in artificial intelligence is driving continuous innovation in the semiconductor industry, and thus ushering in enormous growth potential. How to seize the opportunity of restructuring the semiconductor industry chain has become a focus of attention for all parties in the industry, and accelerating industrial innovation through global open cooperation has become a consensus in the industry.
The semiconductor industry is entering an important period of opportunity
After experiencing a cyclical decline last year, the global semiconductor industry is gradually recovering in 2024. At the SEMICON China 2024 International Semiconductor Exhibition held in Shanghai recently, experts stated that global semiconductor sales will achieve a positive growth of over 10% this year, and are expected to exceed trillions of dollars by 2030. In the process of the global semiconductor market moving towards trillions of dollars, artificial intelligence (AI) and its driven new intelligent applications will become an important driving force for the sustained progress of the semiconductor industry.
The semiconductor industry is experiencing a recovery
The semiconductor industry experienced a downward cycle in 2023, with a decline of about 11%, "said Ju Long, Vice President of SEMI Global and President of China, an international semiconductor organization. Semiconductors are a typical industry with obvious cyclicality, and technological iteration is the engine driving the development of the semiconductor industry. SEMI predicts that semiconductor sales will increase by approximately 13% to 16% this year, potentially reaching $600 billion, and will continue to grow in the coming years, with an expected milestone of $1 trillion by around 2030.
The trend of industry data indicates that the cyclical decline of the semiconductor industry has bottomed out, and the improvement of final demand and the end of inventory normalization will support the gradual recovery of the industry.
SEMI Chief Analyst Zeng Ruiyu predicts that semiconductor sales are expected to achieve double-digit growth in 2024 and 2025. Among them, the semiconductor equipment and materials market is expected to improve in 2024, followed by a strong recovery in 2025. In addition, China's investment in mature technologies will remain strong, with high bandwidth memory (HBM), fully enclosed gate (GAA) transistors, and advanced packaging becoming hot topics in the current industry.
Handel Jones, CEO of consulting firm International Business Strategy, also believes that the semiconductor market will decline by 9.11% in 2023, but will grow by 11.49% in 2024. It is expected that the semiconductor market will reach $1.1 trillion by 2030, and the long-term prospects of the semiconductor market are very optimistic. The wafer foundry market decreased by 12.18% in 2023 and is expected to grow by 10.15% in 2024. Starting from 2025, the wafer foundry market of 2 nanometers and below will enter a period of rapid growth, reaching $83.5 billion by 2030.
According to Mario Morales, President of the Global Semiconductor and Empowering Technology Research Group at International Data Corporation (IDC), the semiconductor market is expected to grow by 20% to $630 billion by 2024, driven by the rebound in the memory market and industry wide inventory adjustment solutions. The total semiconductor market is expected to reach 804.5 billion US dollars in 2027, higher than the previously predicted 6.7%. As the industry transitions towards artificial intelligence, computing infrastructure, automobiles, high bandwidth memory, and chiplets, the semiconductor market sales will approach $1 trillion by 2029.
AI will become an important driving force
In the process of the semiconductor market moving towards trillions of dollars, the industry will also usher in new generation technology promotion and a continuous stream of emerging application market opportunities, including AI and its driven new intelligent applications, AI PCs and AI mobile phones, new energy vehicles and industrial applications, and other emerging industries. AI is believed to play an increasingly important driving role.
Julong believes that there is a mutually reinforcing relationship between AI and semiconductors. The innovation of AI intelligent applications drives the continuous growth of the semiconductor industry, while the computing power provided by graphics processing units (GPUs) makes AI intelligent applications possible. The two complement each other. 2023 is the year of the explosion of generative AI, and the application of generative AI will also enter a period of explosion. The relationship between AI and semiconductor technology will accelerate the shaping of the future of the industry and affect its direction.
According to Emilie Jolivet, Director of the Semiconductor Department at Yole, a well-known semiconductor analysis firm in Europe, the semiconductor industry, especially in the processor field, is undergoing two major changes: the adoption of small chips and the rise of generative artificial intelligence. Since the release of ChatGPT in November 2022, the rapid rise of generative artificial intelligence has driven a significant surge in AI chip and storage chip shipments in 2023. Driven by some globally renowned technology giants investing heavily in artificial intelligence servers to build their infrastructure, the adoption rate of generative artificial intelligence has surged. These trends will drive the growth of the semiconductor market over the next five years.
Generative artificial intelligence is one of the most important opportunities in the semiconductor industry. Handel Jones predicts that by 2030, generative artificial intelligence will affect over 70% of semiconductor products, significantly reducing design costs and improving semiconductor manufacturing efficiency.
The industry believes that in the next few years, AI will drive the semiconductor industry towards the trillion level. In the era of AI, integrated circuit applications face enormous innovation space, including sensing, storage, communication, security, and energy. AI will generate more and more innovation and growth opportunities in these fields.
The Chinese market contains potential
The Chinese semiconductor industry has a solid foundation for development in various aspects such as technological innovation, market demand, and industrial ecosystem. As the world's largest consumer electronics market, China's demand for semiconductor products continues to grow. With the rapid development of emerging technologies such as the Internet of Things and artificial intelligence, the demand for semiconductor products in the Chinese market will further increase, providing huge market opportunities for the Chinese semiconductor industry.
Zhang Li, President of the China Academy of Electronic Information Industry Development, stated that the semiconductor industry is the cornerstone of information technology development. In 2024, stimulated and led by AI applications, the global semiconductor industry is expected to show a recovery and rebound trend, and China has a rapidly growing, strong, and determined market demand. You can feel the heat and development trend of China's semiconductor industry from this year's SEMICON China exhibition. It can be foreseen that under the promotion of emerging applications such as artificial intelligence, large-scale models, and intelligent vehicles, innovation in integrated circuits and industrial transformation will accelerate. Accelerating industrial innovation through global open cooperation has always been a consensus in the industry.
The integration of the industrial chain, innovation chain, and financial chain promotes technological innovation and industrial development, "said Ye Tianchun, Secretary General of the China Integrated Circuit Innovation Alliance. From now on, it is a good opportunity to invest in China's semiconductor industry. New intelligent applications and market demand are driving the development of the integrated circuit industry, and global informatization is shifting from digitization to intelligence, which will boost confidence in the future development of China's semiconductor industry.
Global technology companies accelerate the layout of AI chips
On March 18th, American chip company Nvidia unveiled the high-performance graphics processing unit (GPU) B200 based on the Blackwell architecture, which can be applied to the field of artificial intelligence (AI), at its developer conference held in San Jose, California. Nvidia CEO Huang Renxun stated that the AI chip launched this time is the engine driving this new industrial revolution.
It is reported that the B200 integrates 208 billion transistors, which is 2.6 times the 80 billion transistors of the previous generation chip. When processing tasks such as providing answers to chatbots, the B200 chip is 30 times faster than the previous generation chip. Microsoft, Amazon, Google and other tech giants will be the first users of Blackwell architecture chip products.
Starting from the launch of the phenomenon level generative artificial intelligence product ChatGPT by the Open AI Research Center in the United States, major technology companies in the United States have focused on the field of generative artificial intelligence, driving a new wave of explosive development in artificial intelligence.
With the forefront of artificial intelligence research shifting towards computationally intensive large language models, the mathematical operations required to construct complex artificial intelligence systems are similar to the working mode of graphics chips, requiring a large number of simple calculations to be performed simultaneously. High performance graphics processors have become the computing power foundation for training artificial intelligence.
Data, algorithms, and computing power are considered the three pillars of artificial intelligence. The data models of artificial intelligence have a great demand for high-performance and high computing power AI chips. In addition, the rapid development of applications in various fields of artificial intelligence has driven the competition in the chip industry to become increasingly fierce, with development goals shifting towards high computing power, high flexibility, and low power consumption.
Nvidia, which was originally a pioneer in the field of graphics processors, has now found broader opportunities and development space. With the help of the AI boom, the company's stock price has been soaring, once becoming the world's first chip company with a market value exceeding $2 trillion, reflecting the surge in demand for AI computing power among global technology companies.
With the successive launch of big models such as Sora and Gemini, many applications based on big models are gradually being implemented, and the shortage of AI chips may continue for a considerable period of time.
If technology companies want to catch up with the trend in big model competition, they must build powerful computing facilities, and AI chips are becoming a bottleneck. It is estimated that Nvidia AI chips currently account for 70% to 80% of global sales in this field.
At present, technology giants such as Google, Microsoft, and "Yuan" company have begun to lay out self-developed AI chips and join the competition for artificial intelligence chips. AMD also announced increased investment in order to challenge Nvidia's market dominance. In December 2023, AMD released the MI300 series chip products that can be used to train and run large language models.
The people who made the most money in the mid-19th century gold rush were those who provided tools, not those who searched for gold mines. Today, artificial intelligence chip companies represented by NVIDIA may play the same role in this technological revolution.
Japan rekindles semiconductor ambitions
Introducing advanced overseas enterprises such as TSMC and cultivating local enterprise Rapidus to target cutting-edge processes, Japan is currently vigorously promoting the semiconductor industry with unprecedented huge subsidies and speed. Industry insiders believe that TSMC's entry is expected to fill the gaps in Japan's semiconductor manufacturing while driving the development of industrial clusters and consolidating its advantages in the semiconductor equipment and materials fields. The reason why Japan is so determined is not only because semiconductors are considered a strategic industry with a "safe" relationship, but also because it has high expectations for revitalizing Japan's industrial economy.
Heavy financial support for key enterprises
TSMC, the global semiconductor manufacturing leader, opened its factory in Kumamoto Prefecture, Japan in late February, which is seen as an important step in Japan's search for a revival in the chip industry. The factory adopts 22/28 nanometer and 12/16 nanometer process technologies and plans to start mass production by the end of the year. At the same time, TSMC will jointly invest in its Japanese company JASM with partners such as Sony, Denso, and Toyota, and start construction of its second factory in Japan within the year. The goal is to achieve mass production by 2027 and is expected to advance the process to 6 nanometers. The "third factory" capable of producing 3 nanometer chips is also under consideration.
It is reported that TSMC Japan's first factory has received government subsidies of up to 476 billion yen, accounting for about 37% of the total expenditure of the wafer fab. The Japanese government will also provide approximately 730 billion yen in subsidies for the second wafer fab.
With the support of huge subsidies, TSMC's chip manufacturing layout in Japan will cover an advanced route from mature processes to advanced processes.
Not only TSMC benefits from government subsidies, but the Japanese Ministry of Economy, Trade and Industry will also increase subsidies for Micron Technology's Hiroshima factory from $320 million to $1.29 billion, providing up to approximately 243 billion yen in subsidies for the joint production of cutting-edge storage semiconductors at factories in Mie and Iwate prefectures by Japan's Kaixia and Western Digital.
In addition to investing heavily in introducing overseas companies, the Japanese government is also generous in cultivating cutting-edge local processes. The Japanese Ministry of Economy, Trade and Industry announced that it will provide up to 590 billion yen in subsidies to Rapidus in 2024. The company was jointly established by 8 related enterprises with the support of the Japanese government in 2022, with the goal of mass producing 2-nanometer logic chips. Rapidus plans to launch a trial production line in April 2025 and begin mass production of cutting-edge 2-nanometer chips starting from 2027.
It is worth noting that in the past, the Japanese government's support for Rapidus mainly focused on the "pre process" of semiconductor manufacturing, and this year it will provide subsidies for the development of "post process" technology for the first time, with a scale of about 53.5 billion yen. The background of Rapidus' focus on post-processing is that the demand for artificial intelligence (AI) chips is growing and the refinement of semiconductors is approaching its limit. AI chips require functions such as computation and memory, and accommodating multiple chips on a single substrate can efficiently interconnect them. Replacing chips that perform necessary functions can improve performance.
Rapidus told the media that it needs 5 trillion yen in funding before mass production begins in 2027, and by 2024, it will accumulate up to 920 billion yen from the government. Therefore, more financing is needed. In response to medium - and long-term needs, discussions will be held on raising funds from private financial institutions and conducting initial public offerings (IPOs).
Compared to the United States and Germany, where TSMC plans to build factories, Japan has demonstrated its determination to develop semiconductor manufacturing through unprecedented subsidy amounts and speed.
Bloomberg reported that in less than three years, the Japanese government has allocated approximately 4 trillion yen (about 26.7 billion US dollars) to revitalize the semiconductor industry. Its plan is to increase financial support for the semiconductor industry to 10 trillion yen with the support of enterprises, with the goal of doubling the sales of domestically produced chips in Japan to over 15 trillion yen by 2030.
Consolidating advantages through industrial agglomeration
Analysts believe that Japan's shift from technological isolation in the past to actively forming alliances with foreign capital will help it fill in the gaps in semiconductor manufacturing while driving the development of industrial clusters, consolidating Japan's advantages in semiconductor equipment and materials.
Although Japan currently holds less than 10% of the global chip market share, it still holds a core position in areas such as semiconductor equipment and critical materials such as photoresist. Ding Ke, Director of the Institute of Asian Economic Research in Japan, believes that TSMC's construction of a factory in Kumamoto will quickly gather upstream Japanese suppliers and downstream customer companies. In the existing semiconductor ecosystem surrounding TSMC, the advantageous position of Japanese equipment and material companies will become increasingly stable.
The Kyushu region where Kumamoto Prefecture is located is the center of Japanese semiconductor companies. After TSMC entered Kumamoto, about 50 companies announced that they would make capital investments in Kumamoto. The Kyushu Economic Research Center in Japan estimates that the investment boom that began in 2021 will bring economic benefits of 20.77 trillion yen to Kyushu in the next 10 years.
TSMC's cooperation with Japan is not just about setting up factories and outsourcing. TSMC has established a materials research and development center in Ibaraki Prefecture and plans to build an advanced packaging plant in Japan, covering the complete layout from the front-end manufacturing plant to the back-end packaging and testing plant.
Taking overseas corporate investment as an opportunity, Japan also expects its equipment and material companies to accelerate technological innovation and capacity improvement. Industry insiders point out that TSMC may catalyze a qualitative change in Japan's semiconductor industry, increase outsourcing orders, and gradually shift from the past Integrated Device Manufacturing (IDM) model to specialized division of labor.
However, government guidance and subsidies alone are not everything. During an interview with Japanese media, Tokyo Electronics Agency's Changhe Helishu stated that government subsidies can serve as a catalyst to stimulate new investment and drive the expansion of the entire supply chain, including equipment and other businesses. However, companies must have profitability and avoid relying solely on government support.
Professor Suzuki from the Graduate School of Public Policy at the University of Tokyo also commented that the semiconductor industry requires continuous investment. If companies cannot form their own profitable and reinvesting ecosystem, they will eventually be eliminated by the market.
Intending to revitalize the industrial economy
As a strategic industry that can attract a large amount of capital and technology, semiconductors are expected to revive Japan's industrial economy. Currently, semiconductors are a crucial factor that cannot be ignored in both the stock market and exchange rate. Even in promoting wage growth and alleviating population decline, we hope for the development of the semiconductor industry to drive progress.
In terms of the stock market, semiconductor stocks have become an important driving force for the rise of the Tokyo stock market, with significant fluctuations affecting the market. The weight of leading stock Tokyo Electronics in the Nikkei average index has rapidly risen to nearly 10%; In terms of exchange rate, as the scale of overseas profits returning to Japan by enterprises is becoming smaller and smaller, the main force of yen buying in the past is no longer strong. To increase yen buying, it is necessary to enhance domestic industrial competitiveness by increasing overseas direct investment such as the construction of TSMC's Kumamoto factory.
Japanese Prime Minister Fumio Kishida delivered a video speech at the opening ceremony of TSMC's Kumamoto First Factory, stating that in order to improve the domestic foundation of cutting-edge semiconductors, the Japanese government has taken unprecedented bold support. I hope that the relevant measures can create a virtuous cycle in Kyushu and Kumamoto, driving investment and promoting salary increases.
It can be seen that as a "friendly shore outsourcing" partner of the United States, Japan is making every effort to seize the opportunity in the restructuring of the semiconductor industry chain led by the United States. On the one hand, it is striving to occupy the high ground in this key field and ensure the so-called "security"; On the other hand, it is also an urgent need to promote industrial development and capital flow, and create a new engine for domestic demand.
*Disclaimer: The content of the article is the author's personal opinion. Reproduction on the website is only intended to convey a different viewpoint and does not represent the company's endorsement or support of that viewpoint. If you have any objections, please feel free to contact us.