Semis turn up
Author: EIS Release Date: Sep 18, 2023
After five straight quarters of declining revenue, the semiconductor industry reversed course and increased revenue in 2Q23 according to the latest Omdia’s Competitive Landscape Tracker.
The research noted quarterly revenue grew 3.8% to $124.3 bn in this period. This growth is in line with historical patterns for the total semiconductor market, with the second quarter revenue increasing on average of 3.4% from the first quarter (using data from 2002 through 2022).
However, growth within semiconductor segments continues to diverge from historical trends. For example, the DRAM market was up 15% in 2Q23 with the historical pattern of 7.5% in the second quarter.
The growth is a welcome sign for the semiconductor industry after the longest period of declines since Omdia began tracking the market in 2002.
However, the toll of the shrinking market has reduced the current market considerably, with the semiconductor market by revenue now at 79% of what it was one year ago when total revenue was $160bn in 2Q22. It will take time to return to the revenue levels of late 2021.
NVIDIA led the semiconductor turnaround in 2Q23. Industry wide, semiconductor revenue grew $4.6 bn from the previous quarter, and $2.5bn of that increased quarterly revenue came from NVIDIA alone. The rapid, recent growth in demand for generative AI, a market that NVIDIA dominates, is pushing NVIDIA up the market share rankings.
The data processing segment, driven by AI chips into the server space, grew 15% quarter-over-quarter (QoQ) and makes up nearly one-third of semiconductor revenue (31% in 2Q23). The wireless segment (dominated by smartphones) is the second largest segment and declined 3% QoQ as end-demand in this sector continues to be weak. The automotive semiconductor sector continues to grow, up 3.2%.
NVIDIA has led the turnaround, increasing semiconductor revenue 47.5% from the previous quarter. One year ago, NVIDIA was the 9th largest semiconductor company by revenue, at the end of Q2-23 the ranking is third.
While NVIDIA was the biggest influence on the growing market, most major firms also contributed to the growth. Of the top ten firms, eight increased semiconductor revenue in 2Q23, illustrating that the turnaround is not limited to one sector of the overall market.
The market for generative AI (GAI) applications will grow from $6.2 billion in 2023 to $58.5 billion in 2028, a CAGR of 56%. The market for generative artificial intelligence (GAI) applications erupted in 2023, as startups and hyperscalers released a wave of large language and diffusion models, the basic building blocks for GAI.
GAI and AI revenue forecast, world markets 2022-27
GAI is a subset of the larger AI software market. The sudden and intense interest in GAI is propelling the entire AI software market beyond previous forecasts.
Omdia estimates GAI will add $3 billion to its prior AI market estimate in 2023 and $13 billion in 2027, leading to a total AI software market of in $160 billion in 2027. GAI is in the innovation stage and market players are entering a phase of great experimentation and some confusion.
The forecast also mentions significant risks, as the current version of GAI has shown to be unreliable in several aspects, including bias, hallucinations, factual errors, , and copyright infringement, and its associated costs are currently much higher than traditional AI approaches.
Over the forecast period, Omdia expects the top four use cases for GAI will be virtual assistants, building generative models of the real world, writing assistants, and automated code generation and assist.
By industry, consumer-targeted uses (e.g., search engines and computer-aided art and photography) and media and entertainment (e.g., game development and video and audio production and generation) will be the largest verticals.