Growth in AI Could Not Prevent Down 2023 for Semi Sales

The rapid growth of artificial intelligence dominated the news in the semiconductor industry last year. But even this upsurge could not prevent overall semiconductor sales from sliding from 2022 levels as the effects of the post-COVID industry slump continued to linger.

According to Omdia’s Competitive Landscape Tool, overall semiconductor sales fell 9% from $597.7 billion in 2022 to $544.8 billion in 2023. The hangover of softening demand and higher inventories reversed a COVID-era situation of high demand and low inventories, noted Omdia Senior Research Analyst Cliff Leimbach.

With all the attention focused on AI, it is not surprising that companies that have focused their energies on developing GPUs and processors for generative AI and machine learning are reaping the benefits of AI growth. That was clearly borne out in Omdia’s rankings of top semiconductor suppliers, with Nvidia seeing its revenue soar 133% year-over-year to $49 billion. Nvidia leapfrogged South Korea-based Samsung to be the second largest semiconductor supplier behind Intel. While Intel has also been investing heavily in AI, its 2023 revenue fell year-over-year from $60.8 to $51.9 billion, barely edging out Nvidia, as the industry’s longtime leading semiconductor supplier continued to experience the lingering effects the post-COVID slump in demand for PC and server processors.

Related:Intel, Nvidia Primed for Heavyweight Battle in AI

Omdia’s rankings of semiconductor suppliers (see graph below) reflected continuing troubles for memory suppliers, including Samsung, Hynix, and Micron, all of whom saw sales declines exceeding 30% as their inventories bulged amidst weak demand. Elsewhere, companies that invested heavily in markets such as automotive, such as Infineon and STMicroelectronics, managed to see their sales increase over 2022 levels.

2023 Semiconductor Rankings By Revenue

AI-focused Nvidia saw its 2023 revenue soar by 133% and rank the company behind only Intel. (Omdia)

AI Driving 2024 Growth

In a separate report, Omdia expects total semiconductor revenue to top $600 billion in 2024, driven by the growth of generative AI and to a lesser extent inventory adjustments by suppliers. A major area of growth will be in AI accelerator chips, according to Omdia Senior Analyst Claire Wen.

"NVIDIA currently dominates the AI accelerator market, particularly for cloud and data center deployments,” Wen said. “Concurrently, major hyperscale cloud service providers like Google, Amazon, and Microsoft are developing their own AI Application Specific Integrated Circuits (ASICs) to enhance cost-efficiency and performance tailored to their unique AI workloads. Moreover, there's a notable rise in edge AI adoption, particularly in AI PCs and smartphones, facilitated by the availability of compact AI models enabling offline AI application execution.

Related:AI, Vehicles Driving Electronics Industry Growth

Another market research firm, Gartner, also has an upbeat 2024 forecast. The firm projects global semiconductor revenue to reach $624 billion this year, led by booming demand for parts such as accelerators for data center servers to support both training and inference of AI workloads. But Gartner also predicts 2024 to be a bounce-back year for other semiconductors, including memory.

According to Gartner, NAND flash revenue declined by 38.8% to $35.4 billion in 2023. As prices level off and inventories drop, demand is projected to recover and revenue will jump by 49.6% year-over-year to $53 billion.

Likewise, Gartner expects improved market conditions for DRAM, with prices rising from depressed 2023 levels and overall DRAM revenue rising 88% to $87.4 billion.