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Semiconductor Industry Trends 2023

Semiconductor Industry Trends

ICT | Mar, 2023

As our lives continue to revolve around technology, the use of semiconductor is becoming more ubiquitous. Known as the ‘brain of modern electronics’, semiconductor chips are enabling advances in communications, computing, healthcare, military systems, transportation, clean energy, and other applications. Although the semiconductor industry accounts for a small percentage in the global GDP, but they have multiplier effect across different sectors for the economy with even deeper integration to the global value chain. The chip shortage in the past two years created havoc across various end-use industries, especially consumer electronics and automotive industry, leading to shutting down of production facilities and denting sales.

Megatrends such as remote working, rising use of artificial intelligence tools and technologies, surge in demand for electric vehicles are driving the adoption of microchips across the world. Around 70% growth of the semiconductor industry can be contributed to three end-use sectors such as automotive, computation and data storage, and wireless. However, the conflict between Russia and Ukraine, rising tensions between China and United States, ongoing inflationary pressures are bringing new wave of challenges for the semiconductor industry.

With the demand for microchips projected to rise exorbitantly in the coming decade, the semiconductor manufacturing and designing should gather a better understanding of where the market is headed and what will drive demand over the long term?

Tech Giants Producing their own Chips

Currently, 60% of semiconductor chips are sourced from TSMC. The past two years had been exasperating for tech companies as corporation struggled to procure enough supply of semiconductor parts to keep up with the growing consumer demands. Hence, the ongoing global chip shortage and growing need for custom-made chips are making tech firms develop their own semiconductors. Tech giants such as Apple, Amazon, Facebook, Tesla, Baidu are bringing certain aspects of chip development in-house rather than use the same generic chips used by the competitors. Customizing chips that suit their applications would provide tech companies more control over the integration of software and hardware. Besides, manufacturers can gain enhanced autonomy and self-reliance over semiconductor suppliers by producing their own chips.

In 2020, Apple announced to move away from Intel to make its own M1 processors for new iPads and iMacs. The company plans to source chips from Arizona plant from 2024 and diverse away their supply chain from Taiwan. The CHIPS Act passed in 2022 includes USD50 billion in financial incentives to semiconductor companies for building chips factor on US soil, which is enforcing big companies to plant their own foundries.

Cost might become a barrier in preventing other tech companies to opt for in-house chip development since designing chips requires millions of dollars of investment in R&D, specialized tools and expertise, prototyping and testing chip technology that often takes years. However, chip level innovations can create super consumer experiences and improve productivity that can far outweigh the upfront investment.

Rolling Out of 5G to Boost Microchip Adoption

According to a study by IDC, the global data is projected to increase 10X to 163 zettabytes by 2025. 5G, the fifth generation of wireless technology for digital cellular, promise to transfer large amounts of data 100-200X faster than 4G LTE. For realizing the true potential of 5G, various components of the IT infrastructure such as processors, modems, and logic chips at leading-edge nodes and devices would be required. New devices used in the smart standard will require fabs to produce high-performing wafers with greater capacity for memory and storage. Meeting the demands of emerging technologies would also mean increasing chips’ baseline memory while generating a high volume of chips in a shorter period. Thus, manufacturers will have to ensure that the manufacturing equipment and gas delivery systems utilized in fabs are built for greater complexity. Hence, the demand for high-performance and reliable semiconductor chips is expected to grow substantially to sustain next-gen IoT applications. By 2022, automotive manufacturers would require more advanced sensors and 50% more semiconductors as cars become more automated and connected.

With growing focus on the development of smart cities and autonomous vehicles, the semiconductor companies would require fabricating more complex chips. Chips with high complexity requires a high level of precision for fabricating patterns with widths around 10 nanometres. Hence, the rollout of 5G will have a downstream effect on semiconductor sales, with fabs producing a higher volume of chips for both emerging and existing markets.

Major Innovations in Semiconductor Chips

Emerging demand for smaller sizes, diverse connectivity technology, and low power consumption are making semiconductor manufacturers focus on sensors and integrated circuit development. Reducing the size of semiconductor would mean reducing structure size by using novel materias. Materials such as silicon carbide (SiC) and gallium nitride (GaN) are being utilized in semiconductor manufacturing for high voltage resistance, higher operating temperatures, faster switching, and small form factor.

Chip fabrication generates carbon emissions due to manufacturing tools, chemicals, raw materials, and extensive subfab facilities. Hence, chip manufacturers are now transitioning to alternate fuels such as biogas and green hydrogen to ensure sustainable operations. As fabs are emphasizing the GHG reduction, the use of alternative chemistries is projected to grow in the semiconductor manufacturing industry over the coming years.

Rise of Edge AI Chip Industry

Edge AI is one of the biggest trends in the chip industry, which is expected to register 100% growth in the next five years. Driven by always-on applications such as keyword detection, the AI chips are growing in demand exponentially. Rising application of speech and sensor applications and selected vision applications are facilitating the incorporation of these chips. Moreover, increasing enterprise workload on the cloud and rapid growth in intelligent applications are contributing to the adoption of edge AI chips.

Many start-ups are developing flexible multifunctional chipsets that combine microcontrollers and analytics into IoT to move computing to the source. For instance, Nano-Core Chip, a Chinese start-up creates AIoT chips that improves industrial application value in terms of low latency and high storage density. Another South Korean start-up, Rebellions offers domain-specific AI processors that uses silicon kernels suitable for complex deep learning algorithms. Gauss Labs is a US-based startup that offers AI-based solutions for precise manufacturing and reduce disruptions. More technological advancements in AI and IoT are expected to translate into the emergence of novel applications of semiconductors.

3D Printing for Semiconductor Manufacturing

Each new generation of fabrication plants requires new ways to redesign the manufacturing process. 3D printing offers new ways to deliver more powerful and compact chips. The additive manufacturing technology provides the ability to design parts in shapes with no limitations. Hence, the new technology can design parts to make the new facilities more efficient, with fewer failures and enhanced reliability. However, 3D printing for electronics is confined to passive components such as inductors, sensors, interconnects, certain radio frequency components, and PCBs. Another advantage of 3D printing electronic components is that the manufacturing companies would not require to keep a bulk supply of certain passives, which would reduce dependence on the supply chain. Furthermore, the traditional manufacturing process can often be hampered with vibration, leakage, erratic flow and dead zones. Hence, supplementing the traditional processes with additive manufacturing can cut machinery parts and save weight.

According to TechSci Research report on “Semiconductor Market - Global Industry Size, Share, Trends, Opportunity and Forecast, 2017-2027, Segmented By Type (Integrated Circuits (Logic, Memory, Micro, Analog), Sensors, Optoelectronics, Discrete Semiconductors), By Process (Doping, Wafer Fabrication, Masking, Etching, Others), By Application (Networking & Communication, Healthcare, Automotive, Consumer electronics, Industrial, Smart Grid, Gaming and Others) and By Region”, the global semiconductor market is expected to grow at a significant rate during the forecast period, owing to the growing adoption of consumer electronic goods and rising implementation of microchips in autonomous and electric vehicles.