The semiconductor trade remains to be in a “transition yr,” says the CEO behind the West’s solely producer of silicon wafers, as producers attempt to navigate their method by means of the top of a years-long droop in demand.
Throughout the pandemic, chipmakers loved bumper income resulting from stay-at-home customers snapping up electronics and provide shortages. However the finish of the pandemic led to a droop, as producers and retailers had been confronted with elevated stockpiles and customers who stopped shopping for as a lot as they returned exterior.
Chip corporations hope the AI growth will drive demand for his or her merchandise, however the CEO of a serious German semiconductor agency thinks the trade wants to attend only a bit longer for good instances to return.
“We’re nonetheless on the finish of a down cycle,” Michael Heckmeier, CEO of German chip provider Siltronic, stated after the opening of the corporate’s newest wafer fab in Singapore. “2024 is a transition yr.”
As a substitute, Heckmeier sees the trade recovering subsequent yr. “We’re nonetheless getting ready for the large progress to come back…induced by mega traits akin to synthetic intelligence, electro-mobility, and digitalization.”
Some chip firms, like Nvidia and its suppliers, are already benefiting from the AI growth. Nvidia, whose GPUs are key to coaching massive language fashions, reported a income of $60.9 billion in 2023, a 126% bounce.
But a lot of the trade is warning that demand may keep restrained this yr.
In April, Taiwan Semiconductor Manufacturing Firm, the world’s largest contract chipmaker, scaled again its outlook for 2024, warning that the smartphone and private pc markets stay weak.
That very same month, one other contract chipmaker, United Microelectronics Company, stated “demand stays muted” for the automotive and industrial segments resulting from a slower-than-anticipated tempo of “stock digestion”.
One other chip win for Singapore
Based mostly in Munich, Siltronic manufactures silicon wafers used within the chipmaking course of. The corporate is the one Western wafer producer.
In April, Siltronic minimize its 2024 outlook, citing the “additional growth of demand weak point.”
But on Wednesday, Heckmeier stated in his opening speech that new applied sciences “underscore the rising demand” for semiconductors and wafers, and that the corporate is “absolutely ready” to fulfill the demand with its new plant in Singapore.
Siltronic has invested $2.2 billion in its new wafer plant, its third in Singapore. The quantity is the most important funding within the firm’s historical past. The plant will be capable of produce 100,000 wafers monthly by the top of the yr, and Heckmeier recommended the fab may attain full capability inside 5 years. Siltronic opened its first fab in Singapore in 1999.
Singapore has received a number of chip-related investments lately. GlobalFoundries and UMC–two chipmakers Siltronic works with–introduced Singapore funding plans of $4 billion and $5 billion respectively. Final week, a TSMC-backed chipmaker, Vanguard Worldwide Semiconductor, introduced a $7.8 billion plant as a part of a three way partnership with the Netherlands’ NXP Semiconductors.
Regardless of fierce international competitors for semiconductor investments from international locations massive and small, Heckmeier determined it was finest to put Siltronic’s funding in well-understood territory.
“Once you resolve on a brand new funding, you do all types of study, vitality value, private value, total atmosphere. That did set off on the finish, the choice to not go for an additional greenfield place, however so as to add this manufacturing unit the place we’re already right here,” he stated.
Singapore has had semiconductor manufacturing since 1968, and now hosts firms throughout the provision chain together with suppliers, designers, and the chipmakers themselves.
The semiconductor trade now accounts for nearly 1 / 4 of Singapore’s added worth in manufacturing, Singapore Deputy Prime Minister Heng Swee Keat stated on Wednesday. Manufacturing contributes 20% of Singapore’s GDP
Heng stated the Singapore’s authorities is committing $28 billion for the nation’s R&D ecosystem, with chip analysis a “key focus space.”
