The semiconductor and electronics market is expected to reach US$ 1 Trillion mark by 2029. The expanding digitalization and integration of AI, machine learning and cloud computing into real-life social instances, heavy investment by technical giants in the development of material and processing technologies, growing government subsidies and R&D funding and an increasing societal push toward autonomous computational technologies and virtual reality play a pivotal role in the achieved growth boost in semiconductor and electronics market.
Since chip demand is expected to increase over the next ten years, semiconductor manufacturing and design firms would benefit from thoroughly examining the market’s prospects and the factors influencing demand in the long run. Further, it is ideal for manufacturers and designers to assess the situation and ensure they are best positioned to benefit from megatrends such as remote working, AI development, and the surge in demand for electric vehicles. Crises are affecting many automakers and some experts anticipate ending soon. Together, chip manufacturers and automakers must address the imbalance in demand. In addition to the auto industry, other industrial players would also be affected by the chip shortage caused by weak supply chains that heavily depend on Asia as a hub for the manufacturing of semiconductors. An emphasis on cutting-edge chips and technologies and innovations that go far beyond node size, making audacious long-term investments, building greater resilience, enhancing the talent pipeline and cooperating within the semiconductor ecosystem could help the players mitigate the respective crisis.
Semiconductors and Electronics Services Market – Key Findings of the Report
- Although semiconductor and electronics revenue growth broke records, recent geographic and product shifts are upending long-standing business strategies. New technologies and business challenges like escalating coding, testing and verification complexity are causing R&D budgets to increase by about 6% annually.
- Several semiconductor and electronics companies have launched venturesome initiatives to reduce costs and increase productivity through better data and analytics, much like their counterparts in other industries. Nonetheless, the main focus of these initiatives has been on accelerating routine engineering tasks like chip design and component failure analysis. However, as costs keep rising, semiconductor and electronics companies are rethinking management to gain new insights that will enhance decision-making. Manufacturers’ investments fuel the OEM service provider growth to increase the scope of their service offerings and technological advancements that enable quick processing and shorter test times, allowing OEMs to dominate the semiconductors and electronics market in 2021.
- In the semiconductor industry, R&D cycles can be lengthy, sometimes exceeding ten years and businesses frequently do not see immediate rewards. Since most publicly traded companies don’t always have the appetite for long-term investments, some governments have historically assisted in funding such work. Even though many investors might be hesitant to commit capital over a long period of time, semiconductor companies have shown that risky, long-term investments can eventually generate sizable returns.
- Similarly, artificial intelligence/machine learning (AI/ML) can significantly increase business value for semiconductor companies at every stage of their operations, from research and chip design to production and sales. As per a global survey, a third of semiconductor manufacturers claimed to have already seen a return on their investment in AI/ML after fully scaling up their initial use of the technology and investing heavily in talent, data infrastructure, technology and other enablers. The development of the remaining 70% of respondents is a bit slow-passed because they are still in the AI/ML pilot stage.
- The complexity of chip design, changes in the value chain and increased competition for talent have all increased the significance of ecosystem building within the semiconductor industry. Client partnerships are already common. Businesses working together to create ecosystems where one participant develops intellectual property (IP) building blocks that many clients can use is another type of collaboration. An example is the processor architecture that Arm developed and that other businesses can license. As the semiconductor industry consolidates, several businesses are also implementing a programmatic M&A strategy, a serial approach to smaller acquisitions along a particular theme.
- Automotive chips currently make up 12% of all semiconductor sales and future sales are anticipated to increase by 14% annually. Automotive semiconductor sales generates US$ 65.12 billion in 2022. Semiconductor and electronics market demand analysis reveal that automotive and power semiconductors & electronic units are gaining traction despite the global semiconductor shortage due to lack of new production capacity, geopolitical tensions, limited stock and problems associated with contract terms.
- The demand for semiconductors is changing due to the new electronic systems in the crucial application areas of driver information, powertrain body, safety and chassis. Similarly, the increase in electronic vehicles is changing consumer demand for various device categories, such as sensors, memory and micro-and logic components, helping to drive the demand for automotive semiconductors.
- China has become a key location for international product development and R&D for many semiconductor OEMs. In addition, the Chinese government frequently provides incentives to companies, such as subsidies, to encourage them to produce goods that can be claimed to be Chinese-made. The respective feature encourages multinational OEMs with significant Chinese sales volumes to increase their purchases of semiconductors and other components from Chinese-owned suppliers.
- Similarly, to demonstrate its dedication to forging a stronghold in the US$ 533 billion semiconductor market, the Modi-led administration approved the India Semiconductor Mission (ISM) in 2021 for a budget of over US$ 10 Billion (roughly Rs 76,000 crore). The Ministry of Electronics and IT oversaw the mission’s launch (MeitY)I, where industry and academia are expected to work together to develop a pool of 85,000 semiconductor professionals who can meet the needs of the industry at all levels to make India a top producer of semiconductor chips. Also, an incentive scheme of US$ 7.5 Billion Larges Scale Electronics Manufacturing, PLI for IT Hardware, SPECS Scheme and Modified Electronics Manufacturing Clusters (EMC 2.0). The government is also investing US$ 13 Billion in allied sectors such as auto components, solar PV modules, white goods, ACC batteries and telecom & networking products; in total, US$ 30 Billion investment.
- Also, in March 2021, U.S. Commerce Secretary Gina Raimondo proposed a US$ 52 billion government funding for semiconductor production and research in U.S., which is expected to establish 7 to 10 new factories in the coming years.
- In east Asia, Japan holds dominating positing in the semiconductor R&D and material industry with the presence of semiconductor and electronics giants such as Toshiba, Sony and Renesas. China is trying to overpower Taiwan’smarket share for semiconductors. Additionally, the growing Chinese Mainland market will serve as a channel for business for the IC design sector and its enterprises will continue to invest in Taiwan’s semiconductor industry.
- Four players in the Chinese semiconductor industry—the National Team, Local Team, PEVC funds and MNCs—contribute to making China a world-leading semiconductor powerhouse. The National Team is spearheaded by Large Fund and Tsinghua Unigroup, which have invested billions of dollars in smoothing the semiconductor value chain.
- Silicone is the largest material predominant due to its broad spread capabilities and functionalities, making it suitable for fabricating semiconductor devices. However, due to the limitation of silicone, companies are investing to increase the performance of integrated circuits by adding new materials to silicone. For high performance and efficiency, startups create silicon-dopped materials with other semiconductor materials or composites like graphene and nanomaterials.
