The demand for automotive semiconductors has dropped sharply. Is it time for a m
The semiconductor market trends are undergoing unusual changes.
Despite an overall market recovery trend, the previously robust trends in automotive semiconductors and power semiconductors are beginning to slow down. Many Japanese semiconductor manufacturers have a high proportion of automotive and industrial equipment products, and their business performance has remained stable as these sectors have performed well. However, currently, the prosperity in the automotive sector is about to be replaced by the weakness in the smartphone/PC sector. What will happen next?
The overall semiconductor market is showing a recovery trend
According to the World Semiconductor Market Statistics (WSTS), the global semiconductor market in January 2024 grew by 15.5% compared to the same month last year, slightly lower than the 19.0% increase in December 2023, but still recording a double-digit growth. Positive growth has been achieved for three consecutive months.
From the chart, it can be seen that the memory market is recovering rapidly. The actual results for January 2024 grew by 88.8% compared to the same month last year, significantly exceeding the 63.0% increase in December 2023, and if we look only at the growth rate, it is even faster than the previous peak. However, this is because the memory market was in an extremely poor state a year ago (down 58.6% year-on-year), and the growth rate has subsequently increased. Although memory demand is increasing due to the decline in inventory levels of smartphones and personal computers, the demand for smartphones and personal computers has not recovered. For memory manufacturers, the market has not fully recovered, and the production of DRAM and NAND flash memory has not yet reached full capacity. If operations are fully ramped up, the listing of Kioxia might be considered, but currently, negotiations seem to have not yet been finalized. The memory industry, not just Kioxia, should look forward to a full market recovery.
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In any case, there is no doubt that the semiconductor demand for major applications such as smartphones and PCs is on a recovery trend, which is also a factor in the recovery of the memory market.Semiconductor Growth Excluding Memory is Slowing Down
In January 2024, the growth rate of semiconductors excluding memory compared to the same month last year was 5.5%. This is a decrease from the 9.5% increase in December 2024. The market for devices such as MPUs and application processors for PCs and smartphones performed well, but the previously strong device markets like automotive semiconductors and power semiconductors are now in decline.
Let's take a closer look at it.
Overall analog IC sales decreased by 1.8%. The negative growth has continued for 13 consecutive months since January 2023, mainly due to the sluggishness of general-purpose analog products. During the period when the COVID-19 pandemic disrupted the normal operation of distribution networks, it was extremely difficult to obtain general-purpose analog products used in all fields. As a result, there was an increase in temporary demand worldwide. Now that distribution functions have returned to normal and temporary demand has disappeared, we have to adjust from the past situation. Taking specific application analog products as an example, mobile phone sales have been in negative growth for 12 consecutive months as of September 2023, but turned positive from October 2023. Especially in January 2024, sales performed strongly, with a year-on-year increase of 38.9%. On the other hand, automotive analog has been growing at a rate of over 20% for a long period, but it suddenly began to stagnate, with a 10.9% increase in December 2023 and a 1.9% increase in January 2024.
The entire microprocessor market grew by 8.1%. It has achieved positive growth for seven consecutive months since July 2023, mainly due to the improvement in the MPU market. In particular, the MPU market in January 2024 grew by 33.1% year-on-year, proving that the demand in the PC market is recovering. In contrast, the MCU market has seen negative growth for three consecutive months since November 2023, with a year-on-year decrease of 22.0% in January 2024. Looking at automotive MCUs, similar to automotive analogs, they have long maintained growth of over 20%, but in December 2023, they grew by 15.3%, and in January 2024, they decreased by 9.5%, falling into negative growth.
The power transistor market decreased by 9.4% year-on-year. The seesaw state of alternating positive and negative growth continues. Just like general-purpose analogs, when the market for small signal transistors used in all fields plummeted due to the disappearance of temporary demand, strong power transistors offset this. However, the power transistor market in January 2024 decreased by 8.4% year-on-year, and the positive growth that had continued for 20 months since May 2022 finally turned into negative growth. Power transistors have a high proportion in industrial equipment, but the demand for them as indispensable devices for automotive electrification has been increasing in recent years. The reason for this negative growth is the decline in automotive demand.
Automotive Semiconductors Accompanying Actual Demand
The overall outlook for the EV market has shown a downward trend, replaced by an increase in the ratio of hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs), which is just a change in the composition of production. It is not that the entire automotive industry has shown a downward trend. Compound power semiconductors such as SiC (silicon carbide) largely depend on the demand for EVs, but the proportion of SiC in the power transistor market is only a few percent. Now, when it comes to the main players in power transistors, they are IGBTs and MOSFETs made of silicon, which accounted for 93% of the power transistor market in 2023. If the EV ratio decreases, there may be a negative impact on the IGBT/MOSFET market, but why has the demand for automotive analog and automotive MCUs decreased?
As mentioned earlier, due to the disappearance of temporary demand, general-purpose analog and small signal transistors were forced into negative growth. On the other hand, automotive semiconductors and power transistors have been supported by strong actual demand. Does this mean that there is absolutely no temporary demand? Did the automotive industry only order the minimum necessary amount of automotive semiconductors that are difficult to procure? Absolutely not. Even if you want to produce 100 cars, if you can only procure semiconductors for 80 or 90 cars, the procurement staff will naturally order more than necessary. In a competitive situation happening worldwide, we cannot "lose the bid." Automotive semiconductors and power transistors also generated temporary demand, thanks to strong actual demand. Now that the shortage of automotive semiconductors has been resolved, the excess of over-ordered devices has become a surplus. It is reasonable to assume that the recent plunge is the impact of this.As the semiconductor shortage issue is resolved, the automotive market is at a turning point. In the medium to long term, I believe that with the advancement of electrification and intelligence in automobiles, the demand for semiconductors will continue to intensify, and the adjustments of surplus and shortage mentioned above will not last long. However, I also believe that this turning point may significantly alter the automotive industry's semiconductor-related supply chain.
Specifically, it is compatible with "Software Defined Vehicles" (SDV).
For a long time, cars have been equipped with a significant amount of software, but they were all installed in the form of individual ECUs connected to hardware and existed independently to control each ECU.
However, as cars become smarter, the hardware can remain unchanged, but the functionality can evolve through software updates. If you imagine the smartphones we use daily, it might be easier to understand.
This seems to be a sudden introduction of SDV, but the automotive industry is steadily moving towards this trend. And this change will significantly alter the role of ECU manufacturers (especially Tier 1 manufacturers) and also significantly change the semiconductor supply chain. When the semiconductor market was tight, there was no room for supply chain changes, but now that the supply-demand balance has eased, it is evident that it is time to shift towards car manufacturing centered on SDV.
Now that we have reached a turning point, equipment manufacturers will first worry about declining sales. However, it is also important to propose suggestions to equipment users in the hope of gaining SDV support. On the other hand, if no action is taken, not only will sales decline, but we must also consider the risk of being kicked out of the existing supply chain. Both equipment manufacturers and ECU manufacturers want to formulate strategies to turn this into their opportunity, rather than being swayed by the turning point.
*Disclaimer: This article is the original creation of the author. The content of the article represents their personal views, and our reposting is solely for sharing and discussion, which does not mean that we endorse or agree with it. If you have any objections, please contact the backend.
The semiconductor market trends are undergoing unusual changes.
Despite an overall market recovery trend, the previously robust trends in automotive semiconductors and power semiconductors are beginning to slow down. Many Japanese semiconductor manufacturers have a high proportion of automotive and industrial equipment products, and their business performance has remained stable as these sectors have performed well. However, currently, the prosperity in the automotive sector is about to be replaced by the weakness in the smartphone/PC sector. What will happen next?
The overall semiconductor market is showing a recovery trend
According to the World Semiconductor Market Statistics (WSTS), the global semiconductor market in January 2024 grew by 15.5% compared to the same month last year, slightly lower than the 19.0% increase in December 2023, but still recording a double-digit growth. Positive growth has been achieved for three consecutive months.
From the chart, it can be seen that the memory market is recovering rapidly. The actual results for January 2024 grew by 88.8% compared to the same month last year, significantly exceeding the 63.0% increase in December 2023, and if we look only at the growth rate, it is even faster than the previous peak. However, this is because the memory market was in an extremely poor state a year ago (down 58.6% year-on-year), and the growth rate has subsequently increased. Although memory demand is increasing due to the decline in inventory levels of smartphones and personal computers, the demand for smartphones and personal computers has not recovered. For memory manufacturers, the market has not fully recovered, and the production of DRAM and NAND flash memory has not yet reached full capacity. If operations are fully ramped up, the listing of Kioxia might be considered, but currently, negotiations seem to have not yet been finalized. The memory industry, not just Kioxia, should look forward to a full market recovery.
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In any case, there is no doubt that the semiconductor demand for major applications such as smartphones and PCs is on a recovery trend, which is also a factor in the recovery of the memory market.Semiconductor Growth Excluding Memory is Slowing Down
In January 2024, the growth rate of semiconductors excluding memory compared to the same month last year was 5.5%. This is a decrease from the 9.5% increase in December 2024. The market for devices such as MPUs and application processors for PCs and smartphones performed well, but the previously strong device markets like automotive semiconductors and power semiconductors are now in decline.
Let's take a closer look at it.
Overall analog IC sales decreased by 1.8%. The negative growth has continued for 13 consecutive months since January 2023, mainly due to the sluggishness of general-purpose analog products. During the period when the COVID-19 pandemic disrupted the normal operation of distribution networks, it was extremely difficult to obtain general-purpose analog products used in all fields. As a result, there was an increase in temporary demand worldwide. Now that distribution functions have returned to normal and temporary demand has disappeared, we have to adjust from the past situation. Taking specific application analog products as an example, mobile phone sales have been in negative growth for 12 consecutive months as of September 2023, but turned positive from October 2023. Especially in January 2024, sales performed strongly, with a year-on-year increase of 38.9%. On the other hand, automotive analog has been growing at a rate of over 20% for a long period, but it suddenly began to stagnate, with a 10.9% increase in December 2023 and a 1.9% increase in January 2024.
The entire microprocessor market grew by 8.1%. It has achieved positive growth for seven consecutive months since July 2023, mainly due to the improvement in the MPU market. In particular, the MPU market in January 2024 grew by 33.1% year-on-year, proving that the demand in the PC market is recovering. In contrast, the MCU market has seen negative growth for three consecutive months since November 2023, with a year-on-year decrease of 22.0% in January 2024. Looking at automotive MCUs, similar to automotive analogs, they have long maintained growth of over 20%, but in December 2023, they grew by 15.3%, and in January 2024, they decreased by 9.5%, falling into negative growth.
The power transistor market decreased by 9.4% year-on-year. The seesaw state of alternating positive and negative growth continues. Just like general-purpose analogs, when the market for small signal transistors used in all fields plummeted due to the disappearance of temporary demand, strong power transistors offset this. However, the power transistor market in January 2024 decreased by 8.4% year-on-year, and the positive growth that had continued for 20 months since May 2022 finally turned into negative growth. Power transistors have a high proportion in industrial equipment, but the demand for them as indispensable devices for automotive electrification has been increasing in recent years. The reason for this negative growth is the decline in automotive demand.
Automotive Semiconductors Accompanying Actual Demand
The overall outlook for the EV market has shown a downward trend, replaced by an increase in the ratio of hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs), which is just a change in the composition of production. It is not that the entire automotive industry has shown a downward trend. Compound power semiconductors such as SiC (silicon carbide) largely depend on the demand for EVs, but the proportion of SiC in the power transistor market is only a few percent. Now, when it comes to the main players in power transistors, they are IGBTs and MOSFETs made of silicon, which accounted for 93% of the power transistor market in 2023. If the EV ratio decreases, there may be a negative impact on the IGBT/MOSFET market, but why has the demand for automotive analog and automotive MCUs decreased?
As mentioned earlier, due to the disappearance of temporary demand, general-purpose analog and small signal transistors were forced into negative growth. On the other hand, automotive semiconductors and power transistors have been supported by strong actual demand. Does this mean that there is absolutely no temporary demand? Did the automotive industry only order the minimum necessary amount of automotive semiconductors that are difficult to procure? Absolutely not. Even if you want to produce 100 cars, if you can only procure semiconductors for 80 or 90 cars, the procurement staff will naturally order more than necessary. In a competitive situation happening worldwide, we cannot "lose the bid." Automotive semiconductors and power transistors also generated temporary demand, thanks to strong actual demand. Now that the shortage of automotive semiconductors has been resolved, the excess of over-ordered devices has become a surplus. It is reasonable to assume that the recent plunge is the impact of this.As the semiconductor shortage issue is resolved, the automotive market is at a turning point. In the medium to long term, I believe that with the advancement of electrification and intelligence in automobiles, the demand for semiconductors will continue to intensify, and the adjustments of surplus and shortage mentioned above will not last long. However, I also believe that this turning point may significantly alter the automotive industry's semiconductor-related supply chain.
Specifically, it is compatible with "Software Defined Vehicles" (SDV).
For a long time, cars have been equipped with a significant amount of software, but they were all installed in the form of individual ECUs connected to hardware and existed independently to control each ECU.
However, as cars become smarter, the hardware can remain unchanged, but the functionality can evolve through software updates. If you imagine the smartphones we use daily, it might be easier to understand.
This seems to be a sudden introduction of SDV, but the automotive industry is steadily moving towards this trend. And this change will significantly alter the role of ECU manufacturers (especially Tier 1 manufacturers) and also significantly change the semiconductor supply chain. When the semiconductor market was tight, there was no room for supply chain changes, but now that the supply-demand balance has eased, it is evident that it is time to shift towards car manufacturing centered on SDV.
Now that we have reached a turning point, equipment manufacturers will first worry about declining sales. However, it is also important to propose suggestions to equipment users in the hope of gaining SDV support. On the other hand, if no action is taken, not only will sales decline, but we must also consider the risk of being kicked out of the existing supply chain. Both equipment manufacturers and ECU manufacturers want to formulate strategies to turn this into their opportunity, rather than being swayed by the turning point.
*Disclaimer: This article is the original creation of the author. The content of the article represents their personal views, and our reposting is solely for sharing and discussion, which does not mean that we endorse or agree with it. If you have any objections, please contact the backend.