Thomas Alsop
Research expert covering the global hardware industry
Semiconductor supply chains - statistics & facts
The semiconductor industry recovery in 2024 can be attributed to inventory corrections, an improved memory segment, and growing demand for advanced chips designed for artificial intelligence (AI). While the industry observed a slump in 2023, long-term growth projections mean that both companies and governments have had to develop plans to secure the industry’s future. Whether it be tackling talent and skills shortages or keeping up with demand as semiconductor applications continue to broaden, strategies to protect the semiconductor supply chain have become imperative.
A diverse semiconductor landscape
Semiconductor companies can be categorized into three business models: integrated device manufacturers (IDMs), fabless design companies, and foundry companies. IDMs are responsible for all semiconductor manufacturing processes from design to production, with examples including Intel and Samsung. Fabless companies, such as Nvidia and Qualcomm, produce their designs for semiconductors but do not own any production facilities. The actual production, or fabrication, of semiconductors is outsourced to foundry companies, a market that is led by TSMC.All eyes on manufacturing models
Semiconductor manufacturing requires extensive and in-depth knowledge, especially in producing the most powerful, advanced chips needed in modern electronics and applications. As such, the foundry market is concentrated in a few players in certain regions around the world, most notably in Taiwan and South Korea. However, the concentration of manufacturing capacity in a few regions and companies has raised concerns. As a result, governments are taking steps to address this reliance by investing in domestic semiconductor manufacturing and fostering closer cooperation.Strategies are being implemented across the world
To safeguard the supply of chips, governments around the world have announced a range of measures to support the semiconductor industry. In 2024, China announced its third state-backed investment fund, with 47.5 billion U.S. dollars made available to companies with a focus on chip manufacturing, design, equipment, and materials. In the United States, companies are accessing subsidies and grants as part of the 52 billion U.S. dollars available via the government’s CHIPS Act, a scenario being repeated in Europe with the 43 billion euros offered up through the European Chips Act. Meanwhile, in Taiwan, South Korea, and Japan, tax incentives have also been brought in to reinvigorate their respective semiconductor industries, with greater collaboration across the industry also being established.A history of resilience and adaptability
As we move into 2024, the semiconductor industry is expected to recover strongly, growing to around 611 billion U.S. dollars. While this is a positive step, companies across the whole supply chain must continue to navigate a challenging and changing world. Geopolitical tensions such as the ongoing tech war between the United States and China, as well as the growth of the AI chip market, will have a profound influence on the semiconductor industry in the coming years.
