Golden age or short-term cycle for global semiconductor market?

Marco Chisari, MD, Global Head of Semiconductor Investment Banking, Bank of America, Merrill Lynch, presented on the semiconductor market update: New golden era at the ongoing SEMI, USA, innovation for a transforming world event.

Semiconductors are in full rebound, with the industry trending at an all-time high. All the sectors are performing significantly, such as MCU/GPU, FPGA, etc. Semiconductor equipment sector has also rebounded. Lithography, etc., are thriving. Drivers of growth include global datasphere, data centers, smartphones, PCs, and light vehicles.

Semiconductors are in full rebound, with the industry trending at an all-time high. All the sectors are performing significantly, such as MCU/GPU, FPGA, etc. Semiconductor equipment sector has also rebounded. Lithography, etc., are thriving. Drivers of growth include global datasphere, data centers, smartphones, PCs, and light vehicles.

The semiconductor growth by end markets will see 7 percent CAGR rise, to bring the industry to $1 trillion revenue by 2030. Growth is seen across smartphones, data centers, consumer electronics, automotive, industrial, etc. Unit shipments and revenue continue to show signs of strength. We have expectations on near-term growth and next cycle. Memory and foundry are going to grow higher. Share prices have also grown, and so has profitability. The industry is still trading at an average of 20x P/E, still, a discount to software and Internet.

Top players
Looking at the top 15 semiconductor players, memory consolidation has resulted in Samsung/SK Hynix/Micron in the 2, 3, and 6 positions. Intel, Qualcomm, Nvidia, and AMD are no. 1, 4, 6, and 10. TSMC is no. 3 in revenue, and no. 1 in market capital. Apple has also entered among the top 15 players. Intel and Samsung are now battling for leadership.

In the top 10 fabless players, Nvidia, AMD, Mediatek and Qualcomm are in hyper growth mode at 50-90 percent YoY. Computing and baseband are key growth drivers. The top 10 analog/mixed signal companies are seeing analog content for every $ growing. Top 10 memory players are seeing DRAM consolidation that has driven price stability. NAND is affected by price fluctuations. Memory continues to be a unique story. DRAM and NAND continue to grow at high speed. The real issue is the ASP.

Among the top 10 semiconductor equipment players, ASML is outperforming the leading-edge deep dives into EUV. Semiconductor manufacturing is also experiencing six major challenges. There is supply shortage. ~80 percent of the industry is still manufacturing at mature/main stream nodes, but most investment is at leading edge. Cost per kwpm/installed at leading edge is also exploding.

However, investment in 200mm fab remains limited. Cost scaling at leading edge is flattening. There is concentration of foundry manufacturing in Greater China. This is an increasing geopolitical risk. TSMC dominates as the leading foundry player at the leading and mature nodes. We probably need to have some foundries in the other parts of the world. There are fears of China taking back Taiwan. It may happen over the next 2-3 decades.

The most significant impact for customers are in automotive, consumer, and computing. Mature and mainstream make up 80 percent of the foundry demand. Capex spending is concentrated at logic and memory leading edge. Transistor cost scaling at the leading edge has flattened, driving the need for more advanced heterogenous packaging and 3D scaling.